(

United Western Bank - Consolidated
November 30, 2010
Non-Accrual Loans - Detail
Mitch Bennett $ 260,511 $ 67,311 07129/10 Commercial Real Estate HFI 07129/10
Gerty Gilmore S 236,210 S 28,345 . 08/09109 Construction - Commercia HFl
02127109
John Merchant $ 230,996 09/18(12 Commercial HFl 12118/10
Mitch Bennett $ 228,728 $ 38,884 07129/10 Commercial Real Estate HFI 07129/10
Brad Good $ 220,470 $ 93,881 03127/09 Commercial HFl 03127109
John Merchant S 191,500 09/17/10 Commercial HFI 08/17110
Gerry Gilmore $ 187,142 $ 24,903 08/09109 Construction - Commercia' HFl
02127/09
Geoy Gilmore S 137,831 12130/10 Residential Real Estate HFI 02/28110
Brad Good S 127,716 04101113 Commercial HFJ 07/01110
Geoy Gilmore $ 123,358 $ 20,354 01115/10 Land HFl 01115110
Gerty Gilmore $ 123,229 $ 20,333 01115/10 Land HPJ 01/15/10
Geoy Gilmore $ 123,205 $ 20,329 01/15/10 Land HFI 01115/10
Gerry Gilmore $ 123,116 $ 20,314 01/15/10 Land HFI 01/15/10
BradOood S 122,428 $ 95,137 03127/09 Commercial HFI 03127/09
Mitch Bennett S 100,738 12114110 Construction - Residential HFI 07114/10
John Merchant S 100,000 09101109 Commercial HFI 09/01109
John Merchant :£ 85,304 02101111 Commercial HFI 1lI02l1 0
Mitch Bennett $ 34,307 09/01110 Land HFl 09101110
John Merchant $ 29,025 -10123fl1 Commercial HFl 12123/10
1-'1
Mitch Bennett $ 26,062 09/01110 Land HFI 09101110

0 01::& Atkinson $ 9,690 06122/10 . COllSU!ller HPI 05122110
0
$ 73,529,527 $ 8.810.466
SBA Portfolio
Borrower Loan UWB Balanee Iml!airment SBA Guaran!l CoUaternJ OIlSS NcstDue
United Western Bank $ 3,703,968 $ S Commercial Real Estate HFt 08115/10
United Western Bank $ 3,085,000 S 308,500 :£ Commercial Real Estate HFI 12105/08
United Western Bank $ 1,421,075 $ $ Commercial Real Estate HFt 08131110
United Western Bank $ 1,336,673 $ $ Commercial Real Estate HFS 07105/10
United Western Bank $ 716,965 :£ S Commercial Real Estate HFS 07/05/10
SBA $ 222,171 $ $ Commeroial Real Estate HFI 09/05110
SBA S 174,511 $ 66,025 $ Commercial Real Estate lIFl 06105/10
United Western Bank $ 166,784 $ $ Commercial Real Estate HFS 08115/10
SBA $ 63,574 $ $ Commercial HFI 07/14110
SBA $ 57,112 $ $ Commercial HF[ 08105/10
AIF $ 55,121 $ $ 45,329 Commercial Real Estate HFI 05/05/10
Pacific Southwest $ 32,027 $ $ 32,027 Commercial Real Estate HFI 10/17/10
SBA $ 17,581 $ .$ Commercial HFI 02105110
First Commercial S 620 $ :£ 620 Commercial HFJ 12117/10
S 11,053,243 $ 374.525 $ 77.977
Page560f66
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United Western Bank - Consolidated
Non-Accrual Loans - Detail
November 30, 2010
CDF-I/CFF-IV
Borrower Loan Lllan Officer UWB Balance Impairment Maturity CoDnteral Class
_ ]ohn Stramel $ 2,100,000 $ 1,187,800 06/06/33 Comm.;n;ial R.;al Estate HFI
$ 2.100.000 S 1,187.800
SBA Investments
Borrower Loan Acquisition 1JWBllalance _IIllPainnent SBA Guaranty CoUateral Class
Business Loan Center aka aen. $ 785.045 Commercial Real Estate HFI
s 785,045 $ s
Single Family Portfolio
Category # of Loans UWB Balance ImpaIrment
Total Non-AccrualLoa.ns 68 Loans $ 13,850,024 $
Total Non-Accrual Loans - HFI 11 Loans S 3,457,165 $
Government Guaranteed Loans - Past Due 90+ Days 72 Loans $ 5,022,107 nla
Unguaranteed Portion of Government Loans $ 667,923 nla
Total Non-Accrual Loans + Unguaranteed Portion ofGovemmentLoans $ 14,517,947 $
MFSC Single Family Portfolio
CatC!201'Y # of Loans VWB Balance Impairment
Total Non-Accrual Loans 6 Loans $ 183.622 $
Government Guaranteed Loans - Past Due 90+ Days 83 Loans . $ 5,136,308 nla
Unguaranteed Portion ofOovernment Loans $ 396,675 nla
Total Non-Accrual Loans + Unguaranteed Portion ofGovemment Loans $ 580,297 $
Total Portfolio Non-Accrual
S 101,423,484 S 10.37:Z.791
Next Due
03/05/10
Next Due
06/15/10
Page 57 of66
United Western Bank - Consolidated
Non-Accrual Loans - Changes in Bank Non-Accruals
November 30, 2010
10131110 11130/10
Loan Borrower Loan Tree Bolanee* Next Due Balance· NelCl Due Chane:e Reason
Construction-Residential $ 539,910 12101109 nla $ (539,910) Moved to REO
Commercial $ 248,645 01125/10 nla $ (248.645) Charged Off
Commercial Real Estate $ 199,584 02104/10 nla :£ (199,584) Charged Off
Commercial :; 165,600 04/0lflO nla $ (16S.600) Charged Off
Land $ 136.147. 01115/10 Dla $ (136.147) Propertysold,chargedoffremainingbalanee
S 1,289,886 $ $ (1,289,886)
Commercial Real Estate Dla :; 4,915.769 08105110 S 4,915,769 New non.;!ccrua\
Construetion - Multi-Famil nla :; 3,000,000 1lI28110 :; 3.000,000 New non.;!Ccrual
Commercial Real Estate Dla $ 2,738,796 08105/10 S 2,738;796 New non.;!ccrual
Commercial Real Estate nla :; 2,684,835 09/05/10 :; 2.684,835 New non.;!ccrua1
Commercial Real Estate Dla :; 2,455,000 12101/10 S 2.455,000 New non-accrual
Residential Real Estate Dla $ 636,569 09/05/10 $ 636,569 New non-accrual
Commercial Real Estate Dla :;
260.511 07129/10 $ 260,511 New nOD.;!ccrual
CoDlmerciaiRenl Estate nla $ 228,728 07129110 $ 228,728 New non-accmal
S S 16.920,208 $ 16.920,208
t-I Construction - Residential $ 1,750,000 07/25/09 $ 1,320,000 07125109 $ (430.000) Principal Reduction
Commercial :; 1,308,079 08/05/10 $ 1,298,079 08105/10 $ (10.000) Principal Reduction
I'V Commercial $ 124,947 03127/09 $ 122,428 03127109 S (2,519) Principal Reduction
Construction - Residential $ 1,451,704 07/14110 $ 100,738 07/14/10 $ (1,350,966) Property Sold. waiting on deficiency
Commercial $ 29).97 08131/10 $ 29,025 12123/10 $ (272) 4 Payments received
Commercial $ 236,697 10/18110 $ 230,996 12118110 $ (5.701) 2 Payments received
Commercial $ 897,898 11126110 $ 892,582 12126110 $ (5,316) Paymentrec:eived
CommercialRealEstate $ 585,681 11101110.$ 582,402 12101110 $ (3).79) Payment received
go.mmef()ial ______ J99,73L.Jl7/17JJ_0_S __ 191,5oo 08/17110 $ ____ Paymentrecilived
$ 6,584,037 S 4,767,750 S (1.816.287)
Bank Non-Accrual Portfblio Totals $ 59,715.493 $ 73,529.521 $ 13,814.035
Bank ___ . _ . ___ __ _ _ _ __ _$ (8,810.466) $ 3J4S.678
Net Bank Non-Aeerunl Portfolio Totals S S4,lSO.70S S 64,71!1.O61 48 Leans S 10,468,356
CDF·I & CFF·IV Non·Accrual Portfolio Tonlis $ 2,100.000
CDF-I & CFF-IV Impairmentl;$ (1.187.800)
Net CDF-I & CFF-IV Non·Aeerual Portfolio Totals S '12,200
·lndividual balances used do not account for specific impairments
$ 2.100.000. $
$ 0,187.800) S
S 912,200 1 Loans S
Page S8 of66
United Western Bank - Consolidated
Non-Accl1lalLoans - Changes in SBA Non-Accruals
10131/10 11/30110
Loan Borrower Loan Type Balance'" Next Due Bwnnce"_Nextl)l!e!;lIap.jI&
On 1013112010 Report - Not on 1113012010 Report
None
On 1113012010 Report - Not on 1013111010 Report
$ $ $
Reason
Commercial Rea1Estale nla $ 3,703,968 08/15/10 $ 3.703,968 New Non-Accrual
CommercialReaiEstate nla $ 1,421,075 08131110 S 1,421,075 New Non-Accrual
Commercial Reai Estaie nla S 222,171 09/05/10 $ 222,171 NewNan-Accrual
CommercialRealBstate nla $ 166.784 08/15/10 $ 166,784 New Non-Accrual
IS S 5,513.998 S 5,513.998
On Both Reports - Balance nndlor Due Date Changed
Commercial Real Estate $ 36,881 09/17/10 S
Commercial $ 920 11117110 $
s 37,802 S
32,027 10/17/10 $
620 12117/10 $
32,647 S
(4,855) Payment Received
(3DO) Payment Received
(5.155)
SBA Non-Accrual Portfolio Totals $ 5,544,400 $ 10,975,267 $ 5.430,867
SBA Impairments $ (374.525) $ (374,5251 $
Net SBA Non-Aecrual Portfolio Totals S 5.169,875 S 10,600,742 14 LoSlIS S 5.430,867
t----I
I.D
o SBA [nvestmenls Non-Accrual Portfolio Totals
$
$
785,045 $
$
785,(}45 S
$
W SBA Investments Impairmentt _
Net SBA Investments Non-Accruw Portfolio Totals
=
S S 785.045 I LoaM S 7ss.o45
*lndividual balances used do not account for specific impairments
November 30, 2010
Page 59 of 66
United Western Bank - Consolidated
Non-Accrual Loans - Changes in Single Family Non-Accrual.
November 30,2010
10131110 11130110
SBO Loan Borrower City State Bolance* Next Due Balance'" Next Due Chau2e Reason
On 1013112010 Report - Not on 1113012010 Report
Kennesaw GA $ 438,008 06101/10 nla $ (438,008) 5 payments received- due for 12/01110
Stockbridge GA $ 187,600 10/01107 nla $ (187,600) Charged Off
Denver CO $ 133,334 06101/10 nla $ (133,334) 4 payments received _ due for 11/01110
WestHartford CT $ 48.026 07/01/10 nla $ (48,026) 2paymentsreceived-duefor09/01lIO
Natchitoche LA $ 14,345 1lI01/09 nla $ ufl1.315) 11 payments received - due for llIOI/IO
S 821.313 S S (821,313)
eport
Travel1le City MI nlu. $ 213,8S7 08101110 $ 213,857 New non-ac:crual
Me Donough GA nla $ 190,659 11101109 $ 190,659 New non-accrual
l Jonesboro GA nla $ 136,000 08/01110 $ 136,000 New DOn-ac:crual
Sherrill NY nla S 99,232 08101/10 $ 99,232 New DOn-accrual
Lewiston ME nla S 44,987 08101/10 $ 44,987 New non-accrual
College Station TX nla S 401 08/01110 $ 401 New DOD-accrual
$ S 685,136 S 685,136
Changed
San Jose CA S 510,07S 03/01/09 :£ 509.IS5 04/01109 $ (920) I payment received
Englewood CO $ 413,502 05/01110 $ 412,664 06/01110 $ (838) 1 pa.yment received
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Peachtree GA $ 202,250 05101110 $ 202,250 06/01110 9; Interest Only - payment received
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Josbua TX $ 75,916 04101110 S 75,778 05101110 :£ (138) 1 payment received
Reading PA $ 40,989 O4IOlIIO S 40,930 05101110 :£ (59) I payment received
ElCampo TX :£ 36,404 05101110 $ 36,221 07/01110 $ (183) 2 payments received
Reading PA - $ 33,231 07/01110 $ 33.182 08/01110 $ (49) 1 payment received
Reading PA $ 33,231 07/01110 $ 33,182 08/01/10 $ (49) 1 payment received
Readini PA :£ 26,819 07/01110 S 26.779 08101/10 $ ,40) 1 received
S 1,372,417 S 1,370,142 $ (2,276)
UWB Single Family Non-Accrual Portfolio Totals :£ 14.069.726 $ 13.850.024 $ (219,703)
UWB Sinile Family l!!!Eainnents
S :£ $
UWB SiJlgle Family Non-Accrual Portfolio Totnls $ 14,069.726 S 13.850,024 681000& S (219,703)
MFSC' Single Family Non-Accrual Portfolio Totals :£ 129.732 $ 183.622 $ 53,890
MFSC Familx Im[!airments
$ $ $
MFSC Single Family Non-Accrual Portfolio Totals S 129,732 S 183,622 6 LoaDS $ 53.890
$lndividual balances used do not account for specific impairments
Page 60 of66
United Western Bank - Consolidated
Chargeoff & Recovery Activity
Mortgage Charge-OtIs
November 30, 2010
GVA Principal Specific Resen'll GVA Principal Interest Net Chlll-ge-off I
LoaD Borrower Charge-off Charge-off Recovery (Recovery) Desuiption Dept. Acquisition I/O
$ 430,000.00 51 430,000.00 Construction 450 Originated HFI No
$ 199,584.20 51 199,584.20 CommcrcialRealEsta 470 OriginatedHFI No
es (3) $ 79,262.85 $ 89,085.15 S 168,348.00 Construction 227 Originated HFI No
S 100,876.39 51 100,876.391-4 Mortgage 140 Originated HFS Yes
5) S 69,907.18 51 22,464.20 51 92,371.38 Construction (1-4 F8II 650 Originated HFI No
6) $ 222.23 51 15,222.09 Construction (1-4 F8II 650 Originated HFI No
$ (321.94) 51 (321.94) SBA Comm RE 228 SBA Originated oIa
:s (750.00) $ (750.00) SBA Comm RE 228 SBA OrIginated n1a
S 879.630.62 S 111.771.58 51 (1,071.94) S S 1,005,330.11
Mortgage Charge-Offs I Recoveries ,:::510,000:
I.) Natcbes Way, Short sale scheduled to close 12110.
2.) Jensen, Charge-off on 2nd DOT due to position on collateral with large prilllllIY
3.} Horizon property transferred to REO
4.) Street, short sale was completed by BofA on collateral.
5.) Golden, Property sold with short sale in November
I-' 6.) Golden, Property sold 10/29 resulting in a partial charge-off, remaining SVAwhich was allocated $14,999.86 reversed from provision, addtl $222.23 charge-off
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U1 Chnl'ge.()ffs
Loan
GV A Principal Specific Resen'e GVA Plineipal Interest Net Charge-otT I
Borrower Charge-otT . Charge-off Recovery Cbarge-off (Recover),) Description Dept. Acquisition
$ 300,000.01 S 300,000.01 Commercial Unsecure 310 Originated HFI
(2) S 248,645.32 $ 248,645.32 ConunercialUnsecure 470 Originated HFI
$ 165,600.00 $ 165,600.00 CommercialUnsecure 190 Originated HFI
$ 9,25D.63 $ 9,2S0.63 Consumer Auto 450 Originated HFl
$ 2,350.15 $ 2,350.15 Consnmer Overdraft 490 Originated HFI
$ 214.12 S 214.12 Consumer Overdraft 470 OriginatedHFI
$ (7,483.99) 51 (7,483.99) Line of Credit recover 227 Originated HPI
$ (300.00) $ r· 470 .Qriginated HFl
S 726,060.23 S $ (7,783.99) S S 7J8.276.24
NOD-Mortgage Cbarge-Om I Recoveries :: $10,000:
1.) Discount on short payoffofS4.3MM relationship.
2.) Full charge-oft' of line of credit. Business is closed and receivables are naly deemed to be collectible.
3.} Full charge-off of equipment lease. Both bOll'Ower and gauamtor have filed for bankruptcy and equipment unable to be located.
Page 61 of66
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United Western Bank - Consolidated
Real Estate Owned - Summary
November 30, 2010
REO Totals REO Beginning REO NRV REO Ins. or Ending
Loan Borrower Acquisition City State Date Balance Additions WritedowDS Sales aalm Baianet' TyPe
Unilt'd Wt'stt'rn Bank 3,63S,010 (88.830) (10.709) 3,535,471
21,981,968 3,497,404 (138,000) 25,341,372
65,275 76,902 (17.354) 124,823
United Western Bank -1-4 Family
Loan Borrower AC!JlIisition Cig:
Transamerlca Greenville
Originated #1 Bronx
Transamerica Lagrange
Bear Steams {1st Funding} ( Atlanta
Homestar#S Youngstown
MCB Portfolio ARMS Prod Cedartown
Island Mortgage Independence
Bank of America 3 Clarksburg
Matrix Originated 9 Sedlia
First Boston 9/11/95 Hutchins
Homestar#4 Arvada
Taylor Bean 11 MaineviDe
National City 12 Wilmette
Morgan Stanley 1 Westminster
r Bank of America 3 Laguna Niguel
Matrix Oris!!!ated 3/26/10 Columbus
Notes: 1.) Poggi, Chavez & DixOD - Write downs
2.) Ross - REO Sold
State
GA
NY
GA
GA
OH
GA
IA
MD
MO
TX
CO
OH
IL
CO
CA
OH
25.682,252 3,574,306 (226,830) (28,063) 29,001,665
REO Beginning REO NRV REO Ins. or Ending
Date Balance Additions Writedowns Sales Claim Balance
Jan-06 37,879 37.879
Jun-06 34,446 34,446
Jun-07 8,200 8,200
Nov-08 128,700 (31.590) 97,110
Sep-09 142,410 142,410
Oct-09 213,840 213,840
Dec-09 8,502 8,502
Feb-lO 342,301 342,301
May-IO 39,153 39,153
Jul-l0 10,709 (10.709)
Jn1·10 68,545 68,545
Aug-I 0 94,399 (45.900) 48,499
Aug-tO 113,062
113.062
Aug-I 0 276,257 (11.340)
264,917
Oct-l0 517,750
517,750
Oct-IO 58
1
834
58
z
834
2.094,986 (88,830) (10,709) 1,995,447
United Western Bank - 1-4 Family (Harbor Loans) REO Beginning REO NRV REO Ins. or Ending
Class
HFS
HFS
HFS
HFS
HFS
HFS
HFS
HFI
HFS
HFS
HFS
BPS
HFS
HFS
HFI
HFS
Loao Borrower Acquisition City State . Date Balaute Additions Writedowns Sales Claim Balnnce Class
0016685638 James Long Harbor-JulyOOB/IOO LeXington MA Aug-09 290,613 290,613 HFS
290,613 290,613
Notes: 1.) None
Pagc62of66
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United Western Bank.- Consolidated
Real Estate Owned - Summary
United Western Bank - LlUld
Loan
Notes: 1.)
Borrower Aequtsitll)lI City
United Western Bank Westminster
United Western Bank Westminster
Matrix Capital Bank Montrose
Matrix Capital Bank Falcon
United Western Bank - Non-Residential Commercial Real Estate (SBA)
Loan Borrower Ac'lllis.i!ion___. __ __
R Matrix Capital Bank. _ _I.aJs.e
Notes: L)
REO
State Date
CO Dec-08
CO Jun-09
CO May-07
CO Mar-07
REO
State Date
CO Oct-06
Beginning REO NRV
Balance Additions Writedown5
920,000
220,800
71,100
1
1,21l.901
Beginning REO NRV
Balance Additions Writedowns
37,510
=-===
37,510
REO
Sales
REO
Sales
November 30, 2010
Ins. or
Claim
Ins. or
Claim
Ending
Balance
920,000
220,800
71.100
1
1,111,901
Ending
Balnnel!
37,510
-- :,\7.510
Dee Holdings, LLC - Residential Constrnction -191030 REO Beginning REO NRV REO Ins. or Ending
Class
HFI
HFl
HFI
HFI
Class
HFI
LoaD Borrower City State Date Balance Additions Wrltedowns Sales _ Claim Balnnce Class
United Western Bank Larkspur CO Dec-09 615,125 615.125 HFI
nited Westem Bank Denver CO Mar-I 0 1,462,800 1,462,800 HFI
nited Westem Bank Winter Park CO May-I 0 506,000 506,000 HFI
United Westem Bank Denver CO Jun-IO 506,000 (138.000) 368,000 HFI
nited Western Bank Chandler AZ Jul-lO 837,200 837,200 HFI
nited Westem Bank New Castle CO Nov-I 0 371,562 371,562 HFI
nited WestemBank Denver CO Nov-10 3,125,842 3,125,842 HFI
Notes: 1.) Horizon & Nash - New REO
2.) Marzano - REO Write Down
3,927,125 3,497,404 (138,000) 7,286,529
DCC Holdings, LLC _ CommereinJ -191040 REO Beginning REO NRV REO Ins. or Ending
Loan Borrower Acquisition City State Date Balance Additions Wrltedowos Sales Claim Balllllce
00480002131-00003 Trison Development United Western Bank Littleton CO Feb-IO 644,000 644,000 HFI
United Western Bank Alvarado TX Mar-I 0 2,232,000 2,232,000 HPI
United Western Bank Lakewood CO Mar-IO 703,400 703,400 HFI
United Western Bank Centennial CO Mar-IO 250,000 250,000 HFI
UnitedWestemBanlc Parker CO Jul.lO 98,721 98.721 HFI
United Western Bank Lafayette CO Sep-l0 81,144 81,144 HFI
United Western Bank Aspen CO Sep-lO 2,300,000 2,300,000 HFI
Matrix Capital Bank Westminster CO Oct-l0 1,568,834 1,568,834 HFl
·1.1I7s.o99 7,878,099
Notes: L)
PIIge63 of 66
United Western Bank - Consolidated
Real Estate Owned· Summary
Novernber30,2010
DCC Holdings, LLC· Multi Family· 191045
REO Beginning REO NRV REO Ins. or Ending
Loon Borrower Acquisition City State Date Balance Additions Writedowns Sales Claim Balance Class
Notes: 1.) None
Dee Holdings, LLC - L a n ~ -191050
REO Begfnning REO NRV REO Ins. or Ending
Loan Borrower AC!luisition e l ~ State Date BniaJlce Additions Writedowns Sales Claim Balance Class
United Western Bank CastleRoek CO Dec-09 73,241
73,241 HFI
United Western Bank Castle Rock CO Dec-09 62,000
62.000 HFl
United Western Bank Castle Rock CO Dec-09 64,000
64,000 HPJ
United Western Bank Castle Rock CO Dec-09 63,999
63,999 HFI
United Western Bank Castle Rock CO Dec-09 59,000
59,000 HFI
United Western Bank Larkspur CO Dec-09 64,610
64,610 HPI
United Western Bank Larkspur CO Dec-09 63,880
63.880 HPJ
united Western Bank: Larkspur CO Dec-09 68,480
68,480 HFI
United Western Bank: Basalt CO Dec-09 1,012,000
1,012,000 BPI
United Western Bank Arvada CO Apr-IO 623,795
623,795 HF!
United Western Bank Winter Park CO May-IO 506,000
506,000 HFl
...... United Western Bank Parker CO Jul-IO 245,737 245,737 HFI
1.0
United Western Bank Herber AZ JIIl-IO 4,770,000 4,770,000 HFJ
0
United Western Bank Parker CO AUi-iO 2,500,000 2,500,000 HFl 00
10.176.743 JO,176,743
Notes: 1.)
Matrix Financial ServJees • 1-4 Family REO Beginning REO NRV REO Ins. or Ending
Loan Borrower Acquisition City State Date Balance Additions Writedowns Sales Claim Balance Tme
Columbiana OH Sep-09 40,410 40,410 VA
' Ypsilanti MI May-l0 17,354 (17,354) Conv.
Kansas City MO Jun-lO 7,511 7,511 FHA
Memphis TN Nov-IO 14,197 14;197 FHA
Higginsville MO Nov-IO 47,554 47,554 USDA
Mobile AL Nov-lO 15,151 15.151 FHA
65.275 76,902 (17,354) 124,823
Noles: 1.) Mangum. Leiviska & Clark - New REO
2.) Abukaff - REO sold .
J
Page 64 of66
United Western Bank - Consolidated
REO Status Report
November 30,2010
Apprlllsal Appraisal Listing tilting CORmet Contrnct Closing
BOlTOlVCr Loon N1IDIber REO Date Bool<BalDnee Amount Dal. Amount D:at. Amonnt O.le C011JlIlenls
08131110 $ 113,062 0SI27/10 $ 290,000 09116/10 Phoenix $ 329,900 11109/10 $ 277,500 Ilfl8l10
OS13\l10 $ 276.lS7 10108110 $ 124,000 1110lfl0 Phomix $ 1I4,90D
12115/09 $ 14,16Ii 01108110 $ 26.000 1)2101110 LOGS $ 26.900 11/03110 S 15.000 11118110
05111110 $ 39.153 pending
USDA. wniling for approved appraisallUld murk.ting packuse
09108109 S 40,410 051171111 S 47,900 09114109 LOOS $ 49,900
10/04110 $ 58,834 pending
Sbl1 wailing for approved VA markeling package
10130109 S 213,840 nla
HO fighting .vi.tiOlL. hnve not gained access to property yet
08131110 S !l4J99 10101110 S 110,000 11102110 S 69,900
1112S108 $ 128,700 1001110 S 108,000 01I02I09 LOGS S 107,900
0SI21/09 $ 290,613 nla
HO fighting eviction. have nal guined access to propertyye!
09130/09 S 142.410 03109110 $ l7I,ooo 04127/10 Phoenix S 119,900
06101107 $ 8,200 09120110 $ 89,000 08102/07 LOGS
On Hold for litigation Issues. CUITCII! BPO
03101107 $ I 02117/10 $ 38,000 02104110 JamesP. Kulka I Remax $ 14,900
02103110 S 459,531 05112110 $ 400,000 10106110 LOGS S 419.900
06106106 S 34,446 nln
Updaltd BPO shaws "a1ue at $90.000 us of 10110
10112110 $ 511,750 Pending
Wailing for 1IIlII'keting package
05101/07 $ 81,000 09117110 $ 79,000 11114/07 Iamie Corver-Hardin $ 79,000 Updated BPO inslead of ApprllisoJ because ofS amOllllt
0510S110 $ 39,500 09122110 $ 36.000 10115110 Phoenix $ 37,000 10129/10 S 36.000 11123110
07131110 $ 111,402 08131110 $ 86,000 09/17110 Phoonix S 82,500 1000lnO S 73.000 12/03110
07131110 $ 10,709 10l06I10 $ 24,000 111112110 Phomix S 25,900
06110110 $ 7.501 nla $ 0 06/01110 Phoenix S 12.500 No appraisal needed. just a $bell. fire damaged house
01I06I06 $ 37,879 nlll Lifigatiou lssuc5
09119/10 $ 2JOO.ooO 02111110 S 2.500,000 1lI09/10 peuny CattuthfChaff'm·l.i $ 2,500,000 POlential interest !Tam local developer; di.scussions ongoing prior
1-1 to listing to be completed.
1..0
12129/08 S 920,000 12104109 S 1,000,000 02103/10 StcwMosko/CnssidyTw S 1,135,000 Listing amount """",,Ie for 3 parcels. Negotiations ongaing
0
with potenlial buyer ofRSidenlia! 10\5
1..0
06117110 S S06,OOO 06102110 S 550,000 09123110 Farrow/Coldwell Banker S 549,900 ConlmCl fell out
03131110 $ 1,462,800 02123110 $ 1,590,000 08125110 FlIII'OW/Coldwell Banker $ 1.599.000
11110110 $ 3,127.152 05117110 S 4,210,000 ilia ilia nIII Negoliating with poIenliai buy ..... prior 10 listing
07131110 S 98,721 04114/10 $ 385,000 08/03110 SIeVe ThAyer1 Rcmnx $ 3&5,000 Snmc collruml us SWrie Propct1les (was 1".11: 2nd DOT)
07131110 $ 245,731 04110110 S 385,000 08103/10 Sieve ThAyerI Remm< $ 385,000
04130110 S 623.795 02124110 $ 1,000,000 08119110 Farrow/ColdweUBankcr S 899,900 Reduced Ustiag price to inereuse dclllllllll
03131110 S 250.000 03/04110 $ 280,000 08123/10 Daviesllnvemess Properli $ 280,000
11130110 $ 371,562 09/16110 S 406,000 11116110 Mike Heruy/A Team S 419,000
05128/19 $ 506.000 02118110 S SSO,OOO 12115110 GmlienlColdwell Banke' S 550,000 Mechanics lien lssuc5 bcingllddrcssed prior 10 listing o,lllftlllcnt
05128/10 $ 506,000 1l2I05IIO S 5so.000 12115110 OerstienfColdwell Banke $ S5O,ooo being completed
06130/09 $ 220,800 06125/10 $ 240,000 01128110 Slew Moska I Cassidy TIl $ 240,000 Listing agreement being omended 10 ",Oeel $240.000 price
07131110 S 4.770,000 07107110 $ 5,300.000 nIII Dla nla Prop"rtytakeo t"REO 7/13110: in di.scussion with brokers as
12116109 $ 75,241 02115110 S 90.000 07128110 SI"",,'i"hayer/Remax $ 109,900 The listing agreements .... being amended 10 mtecla reduced
12116109 S 62,000 02115110 $ 70,000 07128110 Steve: 'I'ha:yc( I RetDIIl< S 79,900 nsldng price in conelalioD with !he Gppnliscd values
12116109 S 64,000 112115110 S 70,000 07128110 Sieve Tbnycr iRcmnx S 79.900
12116/09 $ 63.999 02115110 $ 70,000 07128110 SleveThaycr/Remox S 79.900
12116109 S 59.000 02115110 S 70,000 07128110 Steve: Tbnyer I Rcmnx S 79,900
12118109 $ 64,610 01113110 S 74,000 07128110 Steve:Thaycr/Rcmax $ 74,000 One assacWed lot sole closed 9129
12118/09 S 63.830 01113110 S 70,000 07118110 Steve Thayer I Remax $ 70,000
12118109 $ 68,480 01113/10 S 16,000 07128110 SIeve Thayer IRemax $ 76.000
12118/09 $ 615.125 01113/10 $ 680.000 07128110 SI."e Tbnycr IRcmnx $ 680,000
07131110 S 837,200 03107/10 S 910,000 11116110 Paul BoylelCassidy TIIrle $ 995,000 I _I _ins and continues 10 lease:
12131/09 S 1,112,887 01102110 S 1,100,000 11109/10 Penny CanutIJIChaflin.Li S 1,100,000
09122110 $ 81,144 03131110 $ 88,200 11120110 le«Skinncr $ 88,200 SilIgle SelfStOlllge ani!; discussing listing willi Property MlUlAger
02119/10 S 644.000 01121/10 $ 700,000 08l03I10 Billy HaIax S 700,000 2 tenalll!l CODIinU. to renl
03131110 $ 2,232,000 Olll5l10 $ 2,400,000 07109110 AmberHoteiCompany HigbestkBest Best and filial oft'ets due 8117110 S pm PST.
03131110 $ 703,400 03/24110 S 815,000 Worldng on I.ease/Pun:hase
10113/06 S 38.738 06129110 $ 245,000 AWDiling approval of zoning by Pad< County
08131110 $ 2.500,000 0SI02I09 S 9.270,000 nln. nla DIa
""",65ot66
I-'
\.0
I-'
o
United Western Bank - Consolidated
Overdraft Report
Date Name
Total
IDB Overdrafts
Aceount#
November 30,2010
$ Overdrawn Omcer Reason Days N e ~ Comment
$ (1,338.81) Carl Kuhlman Preauthorized Withdrawal 23
$ (17.74) Andie Rodenbeck Preauthorized Withdrawal 13
$ (24.49) Andie Rodenbeck Inclearing Check 12
$ (3,366.23) Carl Kuhlman Inclearing Check 8
$ (850.41) Tina Kuykendall Inclearing Check 8
$ (68.73) Greg AtkinSon Inclearing Cbeck 8
$ (25.00) Andie Rodenbeck Preauthorized Withdrawal 7
$ (287.16) Andie Rodenbeck Inclearing Check 2
$ (73.91) Andie Rodenbeck Inclearing Check 2
$ (42.36) Andie Rodenbeck POS Purchase 2
$ (12.79) Veronica Monahan InclearingCheck 2
$ (26.689.62) John Fiedler Inclearing Check 1 1st day negative - Pending officer decision
$ (11,873.10) John Fiedler Inclearing Check list day negative - Pending officer decision
$ (2,325.87) John Fiedler Inclearing Check lIst day negative - Pending officer decision
$ (1,708.79) John Merchant Inclearing Check 1 1st day negative - Pending officer decision
$ (1,248.38) John Fiedler Inclearing Check 1 1st day negative - Pending officer decision
$ (1,178.44) John Fiedler On-Us Check lIst day negative - Pending officer decision
$ (949.05) John Fiedler Inclearing Check 1 1st day negative - Pending officer decision
$ (42.54) Liam Girard Preauthorized Withdrawal 1 1st day negative - Pending officer decision
$ (to.Qot IUItQstil:__ ~ a i n ~ n a n c e Fee 1 1st day negative - Pending officer decision
$ (52,193.42)
Date Name Account # $ Overdrawn Officer Reason DaysNeg Comment
$ (50.00) Tom Kientz Inclearing Check 2 .
$ (4.00) JoAnneGomy Debit Memo 1 1st daynegative-Pending officer decision
$ (5,500.00) Tom Kientz Inclearing Check 1 1st day negative - Pending officer decision
Total $ (S,554.00)
Page 66 of 66
TabC
Exhibit 71
1911
Ii ..
Ii ,.'
6
..
15 '
"
1912
TabC
Exhibit 72
1913
................... ':.'. • ....... •• !.:. ....... , .. , •.• ••• ,. •• ...... ". ...... ,.::'
, AMEN1JiID AND REstATED
SUBA.CCOmmNQ AGREEMENt
AMENDED ..00> AGRSBMB'NT (tho
14
Agreeme.rit',') is
intoby',"nd among UNITED WESTERN aANK®(t7k1a Matrix, CaPital Bank).
btUlk: C'Bank',. EQUITY Dakota trust co"y ("BTC").
EQUITYADMINISTRAT1'VE ,INC., an QhlO c<¢pOrationf'BAS").' /QId, stBlU,JNG
AJjMIN,', ISTitA1'1VB" SERVlCBS.:UC, .. , "., a ,liabili1¥, company (,r$AS"
BAS, the'rcomp$nies"), 8$ day of\,} Un v (the '$ffectiVo'D-.rl,) {the CQlDpanies;STC and
ad reten-ed to herein eaObes • ''J?artt'and collecthtely '" ,: ,
WHEREAS. BAs andBank enteml mto Am.onded;and Restllted
Agteement lIS, of MarQh 1,2009 (the ''CutrentSubaccounting
otbetthinSSj BAS 'prOvides certa,i." services to Bank ar.d Bagk pays fees to, MSi'or such
servioes .,ursuant to thO ' '
WHEReAS. ETC, SAS. Sterlipg Trust Company, an affifiate of Bank (i'StetUnt'). !mdthlited
Western Beneorp_ par4iltcorporadoJl. :ofBaJJk ("UWSK'h to an ,AasotPurchaao
Apri11. 2009 {the "Purcbaso which ETC andSAShawe
acqui", tromSterlicgitslndMdual retirement and qualified plan business;
"" WHBRBA$: theCQlnParues (or will ptovido)9trtain
... '-' '-' -' -.. ... .. ..
,1,'.'0'
: 0"
" "
";
''''''.
'! ' ••
WllllRBAS., ,Ou$t,lial, ,and ,servjoesto,
ac,counts in empJQyet benefit ptans,individual retiromcmt plans p4m
(hereineftcc'.referred to' 8s"Custodia.l (Ililcl such individUal participants of these
arc beJ'einafterrefeaed to 11$ "Custodial and
, Companies and ETC havoopOncd and Willopcm,various accountS With Bank
for thebonofit of CustQdial liolden;"and ' '"
WHBRBAS.the tegtiIatioP$ of the FDIC provide reeordsotanmsured bllilk '
muSJ discJOsO tho ora relationshiptbat provi., the basis .nd the
of tbattelationship muSt be ascertainable ftoJn the of the insured bank or tJie.-ecords
and
WHBREAS. the and ETC desito that the :tbJtds maintained in tho, Bank 'be!
insilted 10 fUJioat extent provided by ll.lw.for each CUstodi.al Account and }{qlcler.
,JiIld and statements preparc;d fc»-'eacll Custodial Account regarding
the $tf.l1sofeach ,Custo<lUUAecounh"bicb 1$ within of,oacb Bank Acco\1nt;and
WflBREASj,BanlC could provide account llQlderreconl..Jceepins for the Custodial an4
CustodW Account HoldCl.'$ or obtain suCh services fl.'O!l1 a third-party provider; and
tho CompaniesllTe willing to act as agent tQr b) ptovideCustodial
Holder rccord-keepbtg and, certain oiherSfl'Vlces with respect to ,the account actiVity by Cu&to!1ial
mau.tafnOd in 'the Bank Aceouritshy tbe,indMduai CUstodial
1914
.'
,.,
. .... ..•.
WHEREAS, Bank and the Companies believc·itappropriate to enter into an .agreement that
provides for the Companies as agent for Bank to provide account holder and certain
other services for the Custodial. Accounts and the CustodialAccount Holders, for which Bank will
fee to the Companies based upon the number of CUstodial Aocounts at Bank and the aggregate monthly
balance of such Custodial in light of the amount of record services and other
to be provided by the Companies with respectlo the Custodial Accounts.
'NOW, THEREFORE, ill consideration or the mutual promises herein contained, and fot otlter
good and valuable eonsideration. the· reteipt and acfequacy ·of which is herehya.cknowledged. it is
mutually agreed as follows;
1. Prom the affective Date until termination hereof. the Companies and/pr eTC sball maintain
,\' various Bank Accounts on beltalf of tbf; Custo(j.ial Account Holders in accOtdance with the terms and.
!:..' (:onciitions hereof: Notwithstanding the obligations deposit requirements that are set fQrth In
;;- SectionIO. the and EtC may withdraw trom the Bank AccollJlts an aggregate amount not
.:.: $100 .millwn in the event· the Companies and/or ETC desire to move such amount to a (mancial
:,: . institution in which the individuals either collectively or individually have acquired "contfol"
f of such financial institution ("control" shall have tbe asCribed to it pursuant to. 12 CFR· 574.4):
::, Jeffrey' A. Desicb, IUchard Desich and RJchard A. Oesich and/or any entities controlled by Or fQr the
;\ .' . benefit of any Ofthem
th
.. (sucb
1
i
l
llstitUti
d
Ncll parties, the "Desicb
. PartieG").Anywt drawalu. owe m .1S ectioll must not ex.......u Smilhon in the during
r ,,' any quart fie dr. ,Bank shall in i!S are
l
CmainULind· edby the
Compallles in a uctary or cueto 1 capacity lor e cnc 0 . e In IVI ua usto ial Account
' •.. :/ Holders. and shall further indicate that the delinc::.ation oiCustodial Account Holders' Interests in theBlUJk
.. ,.
':,' .:. Accounts oCthe Companies, ETC and their affiliates shall not exceed $1 biUiQnwithout the prior written
'.: approval of Bank. .
.' .
"
i
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. .-
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. if >./-
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.. ';' .. '
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2. Each Company shaIlmaintain separate accounting and record.keeping for of its
Custodial Accol.UltS whjch haw balances in the Bank Accounts. Each Company responsible for
pl"Q'li'idinS 8l.1ch aCcounting and recotd-keeping· services as agent. for 'Bank. The Companies and ETC,
jointly and severally, represent and Warrant. covenant and agree that each of the Companies, ETC and
eacho(the Custodial Accounts iSt and at all times wiUcontittue to be, in compliance with the applicabIe
provisions of 12 CPR Part 204 (Regulation .0 rei!rtiqg to interest QIl deposits) and 12 CPR Part .230
(Regulation DO, Truth in Savin$S Act). The· Companies, on behalf of the Custodial Account Holders.
shall issue instructions to by wire transfer; check or other appropriate means to the
Companies and Bank, «:garding tnutsactions. involving funds in ·the Bank Accounts, )3apk. shall .be
entitled to rely Upon such instructions and Bank shall have no liability ror any actor omission
while acting in good faith. Bank shall no duty to act in regard to the Accounts in the abSence
ohuch instructions.
3. Bimkshall provide customary banking services to the Bank Aocounts. IUs upder$tood and
agreed that Bank shall be responsible under this Agreement for the servicing of the Bank Accounts and
not for servicing the individual Custodial Bank· shan furnish to each Company on a Jllootbly
basis a bank statement fot each Bank Account as requested by such Company. Suohstatements shall be
mailed by Bank or be made llVailable to the applicable Company on the third business day follOWing the
close ofibe period being reported .
4, The Companies, as for Bank. shall provide aocount holder recor4-keeping and certain
other services for the Custodial Accounts and Custodial AccountHolders as follows: .
a. Deposits to the Bank Accounts tromaU Custodial Accounts:
Page.2ofS
1915
•••• AO ",'" ..... " ........ ,." ... -, •• ".". ..... ;; ........ •• " •• •• ..... " , • •• .. , .' •• ;.' •• " ... ' .. ..
b; Withdrawals from tJ'le Bank Aocounts for al1c::ustodlal Accounts;
c. Accourttbtg providedtoaIlCustodialAecou.t1ts;
d. tequired fotsub-accountadmirustration of th",Bank
Aocount8; arid
e. Monthly statements. notices and disclosures in compliance with all applicable federal
and state laws and regulations.
5, The Companies shaH furnish to Sank by the fifteenth (15th) day of each month a trlalblllance
which reflects theaccountnumbert name, type of ac;countaild account balance ofeJ<.isting Custpdial
Accounts (thc".Active Accounts") in the Bank AccOunts as of the last business day of the preceding
month. Such report shall be accompanied by It summary which is signed and certified as iruelmd accurate
by the chicffmancial officeroftbe Companie$ or his/b.er designate;. This reportshaU be used to
determine the fee Bank shall pay tl) tbe Companies for the acQount bolder record-keepln; servioes the
Cl)fnJl8!lies provide hereunder. .
6. . Witbm ten (10) dayufter rteeipt pfthe monthly report referred to biSection 5 above. Bank
shan pay to the Companies a to by tbenumberof Active Accounts,
asdctermined by the provisions of Section S. Notwithstanding anything tathe contrary contained herem.
in no event shall the monthly fee exceed 8 percentage yield willi respect to the Bank Acoount$
equal to tbeapplicableContract Variable Rate as set·forth in Exhibit "AU attached (the "Co$ltract
Variable Rate"). It is understood and agreed that such fee is intended. to compensate the Companies for
their prior month·s services in oonnection widl the Active Accounts. No· other fees of any
nature !lna-Ilbc due to the Companies for services provided hereunder.
.. ..... " . ., ...
:.. . right to make a physieal audit at any time ofC<>mpanies' books relevant 10 the matters
.coveredby this Agreement to verify the Cc!mpallies' monthly report of the number of
Custodial Accounts within each. Bank and other matters deemed relevant by Bank. Bankshidl
nett Inake mercthan four (4)llucb aUdits each calendar year.
.'';
....
8. Bank personnel will be tnadeavailable. as reasonably requested, to consult with the
Companies in CQOrQinatlng its operations plJrSUant to this Agreement.
9. Any amendment ttitbisAgteement sballbe valid only if in writing and signed by aD of'ibe
Parties. The teon of this Agreementsllall be for a period beginning as oribe Effective Pate and
continuing until the later of (a) the fifth· oftbeEffective Date or (0) the dale allamoijl1ts
owing undertbe SeUerPinancing (as defined in the Purchase Agreement) bavebeenpaid in full (the
"Tenn';). Upon the expil'ationof the Term or any renewal thereof (tb.cdate of such expirati()ll. the
"Termination Date"), this Agreement shalJ automatically renew for successive l)ne·year periods. unless
sixty (60) days priOr to the applicable Termination Da,te (or the /UUliversary· date or any subsequent
Termination Date) the Companies. or Bank provide written notice of.tbeir .intent to tel1l1inate this
Agreement.1nthe event the Companies terminate this Agreemctit. as provided for inthisSectioti 9, then
for It, period. of six (6) months following such Termination Date, the Companies and ETC may withdraw
up to one-sixth (l/6
ih
) of the aggregate balaricesm the Bank Accounts existing as of the Termination Date
at the end of .,;acl) calendar mr;mth following the Termination Date. Any balances temainingin the Bank
Accounts. after .such period may be witbdrawnatany time thereafter. Notwithstanding any
tennination of this Agreement; aHrlpts. and conditions olibis AgreomentshaU remaiJl
in effect with respect to any cash balances in the Bank Accounts until such balanceli have been fully
withdrawn or distributed.
10. During the·firsttbree (3)yearsoftbeTerm. the Companies and ETC agree that Bank shallbe
the sole depository pursuant to this Agreement of cash balances for the Custodial Accounts. During the
Page 3 ofB
1916
remaining portion of term and during. any renewal thereof, the Companies andErC agree that th¢y
shall deposit with Bank pursuant to this Asreerncmt cash balances of Custodia I Aeeounts in an amoilntat
least equal to (x) an amount equal to the Final Deposit Amount (as define<:! by and finally determined in
accordance with the· Purchase Agreement)Qt' (y) the aggregate amount of all the cash balances of the
Custodial Account!!. whichever is lesser. It howeVer, the and/or ETC acquire Custodial
Accounts with cash balances over $20 million. in connection with the acqUisition of a custodial. trustee or
similar business or other bulk acquisition of Custodial Accoun'tst and the Companies and/or ETC are
required' or otherwise obligated to maintain depo$its relating to the acquired busines$ or accounts with
another fmancial or depository institution in connection. with such tnlnsaction,then the Companies and/or
ETC shall be pennitted to maintain such deposits with such other financil11 or depository institution
notwithstanding anything herein to the contrary.
, Notwithstanding anytltingto the con1:rat)' writtel\ Bank is required prior
to the Compallies and ETC participating 9ut Bank Acc,ourtt deposits to any other federally insured bank or
saving and loan institution chartered Py anageney of the federal government or 8JlY state government
(''Third party Banks"), The Companies will take all reasonable or necessary actions to open such accounts
at Third Party Banks, iricluding, without limitation. the execution and delivery of new account forms and
other customary and reasonably necessary documents required by Bank or any Thitd Party Bank, to allow
thepatticipation of Bank Account deposits as provided for herein. Bank acknowledges that CUstodial
Account Holders have the right. at their $010 option. to direct the Companies and ETC to. deposit their
respect!ve funds with. another depository In$titution; however, ETC and the Companies will use
commercially ret\SOnableeft"ortsro have cash balances relating to Custodial AccQunts at Bank{or
So Thlrd Party Balli< if Bank has consented to participate out any. or all of the Custodial Deposits as
": " provided above). In the event that Bank consents to participate out the deposits in the Bank Accounts with
. -- - .. "
then in effect. the Companies; on the one hand, and Bank. on the other band,. will split the benefit of the
: -, . difference between such higher rate and the applicable Contract Variable Rate. SOISO. In the event. that the
deposit rate being paid on the deposits being by a Third Parly Ba.tik occurs at a rate that is
less than theappJioable Contract Variable Rate,Bank shall be responsible for making the Companies
whole for the difference between such Contraet Variable Rate and such lower rate. The tenn,s.of this
paragrapb shall not adversely affect any rights of the Custodial Account Holders. .
.. =. '
, "
1 L Notwithstanding Sections 9 or 1 o above. upon a breaeh Py Companies or Ere of any
covenant, agreement, promise cir representation or warranty contained herein; Bank maytenninate this
Agreement upon ten (lO) days prior written notice to the Companies. l1pon tho breach by Bank of any
covenant, agreement, prornise or representation or warranty herein. the COmpanies or ETC may
terminate .1Jrls Agreement at anytime upon ten (10) days prior written notice to Bank, In addition, upon
receipt .by any Party of any written instruction, enforCement or other aedon by any agency with
enforcementauthorl1y over either Bank, the CQmpamesor ETC,. indicating that this Agreement, in whole
or in part, violates any applicable regulation to which either Company, ETC or Bank issubjeQt, now or at
any time during the ternl of this Agree1l1ent, this Agreement shall terminate upon the expiration. of ten
(10) days after receipt of such written instruction. order or notice by anypaI1y; The party receiving such
notice shall, within three (3). busineSs days of receipt, provide such notice to tbl'l' othet Parties. This
Agreement may be terminated by the Companies or ETC upon thirty (30) days prior written notice to
Bank after receipt by the Companies or ETC of a rating report published by IDC Financial Publishing,
Inc. indicating a ¢Ol11Posife rank for Bank of 74 or lower.
12. Bank shall indemnify a,nd bold harmless the Companies and ETC and each of their respective
agents, affiliates and employees from all suits; actions. costs, expenses (including reasonableattomeysl
fees),ju4gments or claims OrailY character, type or description brought, incurred or made arising from or
relating to the gross negligence or willful misconduct of Bank in the execution of or perfonnance of this
Page40fS
1917
AgreetJ)et1t; provided that Bank shall haveno·liablUty to the Companies or ETC under tbissection 12for
act:' or omissions taJ'cen or not taken in good faith by Bank.
13. The Compan,iesatid ETC shalljtiintly indemnify and hold hatmleSsBank alld its agents,
affiliates and employees frontalJ suits. actions, costs, expenses (inchldingreasonable attorneys' fees).
judglttents or claims of any character. type or descriptionbroughr, incurred ormade ("Bank Costs")
arising front or· relating to;{A) the gross negligence or willful misconduct of tl1e or BTC,· as
agel1t for Batik, in the execution oforperf'orrnanc;:eofthi.sAgreei1lent;itnd(B) any claim or assertion by
any customeroftbe Companies or ETC. inclu4ingbut not limited to a Custodial Account Holder, relating
it) any Custodial Account or any service provided by the. Companie!,!or ETC to any customer of the
Companies or ETC, bilt l'Iof lilQ,ited to a CllS10dial A.ecount Holder, provided that the foregoing
. in subparagraph (B) shall not apply to the extont the Bank Costs res\.Ilt dirEXlt)y i;ronlthe
gross negligence or willfi,ll misconduot of Bank.
14. The Companies or ETC anti not Bank is the custodian to the Custodial Aoco\lllt Holders who
have interests in tho Bank ACcou,nts.Bank shall have no fiduciary or custodial obligation to any Cttstodjal
Account HoldefS who a Bank Account. In particular, Bank shaltbllve DO responsibility
for. any .l'eCord-keeping funetions of the Cornpaniesot ETC on. behalf of any (:ustodial
Account Holder or for receipt or disposition offunds in the Bank Accounts; provided, that Bank
shaUhOnor the Companies' or ETC'!! wrinon instrllqtions regardmgdisposition of the Bank Accounts.
IS. This Agree1rtent and the account documents entered· into between the Patties retating to the
Bank Accounts (the co A.ccount Documents") the entire understanding of the Parties with·respect to
the subject matter hereof, and supersedesll prior agreements and understandings relating to the subject
.•. _____ .. '. -.'-
event of ariy conflict between hereof the Account P<>cunlentS, theprovisi6ns of this
control. Upon execution of t?is Agreement, and effective as oftbe Effective the
Current. subaccounting Agreemen* and any prior suhaccountmgagreements between the Parties shall be
null and Void and of no further force and. effect; hOWever, the .. provisions in the Current
Subaccounting Agreement witbrespectto matters occurring before the Effective Date shallsuntive and
inure to the benefit of the Parties and their successors and assigns. Nothing in this Agreement sha.lllimit
or otherwise impair any indemnification rights of any . party under . the· Purchase· Agreement,
notwithstanding anything beteln to the C9JlU'llry. .
16. This Agreement may be ·executed bY the Parties· in separate counterparts •. each Qfwhich when
so executed and deliveredilhall beaD original, but aU ·suc;b counterpartS .shall together constitute but one
and. tl1esarne inStrument. Any ··provision. of this Agreement that is invalid, illegal or shan
notaffect in My way the remainmg pro'ViSionshereof.
17. This Agreement shall begovemed by the 1avvs of the United States of America. and 'the
applicable laws of tho Sw,teof Colorado.
18. Any notices provided for under this AgreemeJl1:shaU be inwrltirtg delivered by mail. fax or
overnightdeiivery to:
:pageS ofS
If to: Equity Administrative Services, Inc.
225 Burns Road
Elyria. 01:14403.5
Phone: (Me) 323-5491
Fax:
Contact: JeffreyA. Desieh
1918
If to:
rfto:
Equity Trust Company
l25 Bw.'nSRoad
Elycll1, OH44(l3S
Pbone:(440) 323·549l
Fax: (440) 323-4529
ContaCt: Jeffrey A •. Desioh
United Westem Bank®
100 17111 Street, Suite llOn
Denver, CO 80202
Phone: (720) 956·6548
Fax.: (720) 932-3993
Contact:· Thomas J. Kientz
19. 111e Pamesacknowledge that the terms of this Agreement,inctudingall of its exhibits and
other attachments •. contain confidential commercial and. infomurtion. of the Parties, the public
disclosure of which would have a material adverse on the Parties' respective businesses.
Accordingly, without the prior written the other Parties or as may be by law
(including without limitation applicable regulations of the $ecuritiesand Exchange Commission (the
"SEC"» or legal proceeding; no Party shall,nor shall any Party permit any of its oiticers,
directors; parentcompliUlies or other affiliates to; make any public announcement otdiselosure with
respect to tbis Agreement; including any of its exhibits or .other attachn:lfolnts, or anyoftbe _s or
publioly disclose. tbis Agreement, inciudingany of its exhibits or other attachments, or any of the terms.
: . ,., . . hereof. to any thin:l party. If any such public announcement .01' disclosure by a Party (the "Disclosing
'PW;). 01' ·0)1 any €
:'! ., ..
required by law or legal proceeding. tbenthe pjSC\oslOgParty shaUuse its commercially reasonahle
efforts to seek an appropriate protectiVe order. confidential treatment order or a.greeril.ent, or o1her similar
remedy with respect to the terms of this (or suoh portions hf)rCof as may. reasonably be
prof.ectedpur$lUU1t tOIiPplicable regulations) and to maintain anci/or renew any such order, agreement or
remedY so that it shall remain in effect through the term of this Agreement and for a period of tbree yc::atS
after the expiration or other termination hereo£ In connection with seeking, maintaining or renewing any
such order, agreement or remedy, unless ptohibited by applicable law or regulation, (i) the Parties
shall cooperate with each other in connection with any request, filing ot other· submission with.
the applicable governmental entity, including the SEC, (ii) the Disclosing PartY shall keep tQ.e
other Parties informed in all material respects of any material communication received from, or
given to, suchgovemmentalentity,and (ill) the Parties shall consult with each other in advance
of any meeting or conference with. such governmental entity ... The rigbtsatld obligations· of this
section'shall survive the expiration or other tenninationoftbis Agreement.
[Signatur.e page follows.}
Page60fB
1919
:1
The foregoing Agreentenl biis been above.
EQUITYADMINISTRATrvE SERVICES)iN'C.

TItle:
S'fER.I.lNG ADMINISTRATNE SERVICES.LLC
BQm;rr TRUSTCOM:PANY
____ __
Naute:
Title:
1920
. ,,'.
. ' . "'.'. ,
'1!le foregi;)ing Agr!'CIJlent '-·been of the date and yearftrst written above.
EQUlTY ADMlN1STRATIVE SERVICES, INC.
By:

Title:
sTERLING ADMlNISTRATIVE SERVICES,tl.C
By:. __ ______________ __
Name:
Title:
EQuiTY'TRUS'rGOMPANY
UNITED WESTERN BANK
".
:"';'
';, .
".: '.
'.,
.. (,
. : : , .
1921
ExhibltA
to the Amen. r.f. Elc:I. aflR J8es .. ta.t&d8.1Jb8n1... oUl"ltlng AQrement
Effective[..L day of .lY.l1 / . 2009
Federal Reserve
iargetRatefor
Contract Variable Rate Table
Overnight Federal Contract Variable Eamings Credit
Funds· Rate Rate Pa$S-through Rate
".0.00%":' '. ·2.710%··., :.'.', ': .... :; 2.610% '. ,.... .0.100%·;.'. :
.:-:, :.':'. a.25%::.,::.,\' ;.: .. ': .. 2.7.10%'; ... : :::..;:. ;: :::.:.:1" 2.560%: .. ':: ,: ';: '.
'.,', ...• :... 0'.5Q%·:,:':;.·'::'·:' ". '':'. iii, ::',.;.:. 2.5" ';":;r:': :;, 0.200,0/0,:· .. ·: .r, ..
::-;\ .. :.'.:; :';i\':',:'l :;' 2<7.1Qo/ ..
! :t: :', >':1 :·.1.000/0'1<'.:;:':.:';';' Fr;n'!)··: 2 .. 7; ..10.o/O'l:t.:·;;,oii(': .. :.'
:; ': ... ;':." 1.25%.':;:·;.:'';i': 2;1.10%"'l';;';),:·
:.' ;:'. 1.5QYd:,,'·. ',,:",1:,.2.1:10%'; ;?, ;'::' ..
1.15%'·:: '.;', 2.835%i.:,··; ;::, .. \ 2.565%-:, ;.:-: '';'. "';':·0.250%';':'· .
. ' '.' 2.QO%.,:: .... ,.' :"'-:·2.960%;;.;;'.· -< '.:" /(2.7..10%"::;"":' ':";;"',0.250%:,. \'
.. , ·2.25%/:," ·;:·.·:.,i 3.0850/0····>:.:. :.:·:::2.5a5%.:"-:(··· ,:','.," 0:5QO%:::"I,;
.. 2.50%.,·· . :", , .. , 3.210o/tf: .... ,' . :;':: "., 2,710%". : .. J: . . ,.'. ,:.:.; 0.500% .. ··. .
• '2.75% ..', " .: ..... : 3.3350/0';: :., :-;, ,.,' ·:2.835% '.' l ,".::' 0.500%;';'."
...... '3.00%""· : : .. ,c.' 3.460%::··\ ...... :.::,':," 2.835% :'.':"" t.:··'.· .0.625%',.:.·
. . .3:25%' . :',. ::,:,.,::<: 3,585% :.', ;,' :,:" ";,2;960%'·';.,,·,.:, .::.' i,\, 0;626%\' ':'
.,,;: 3.50% .:::-" ."':'.:' 3.835%' .. ':i '; ,.,. "';3:085%:'1';·.·: .:",:' 0;750%·;"';'"
.' ::3.7.5%· . '.:;" ,: ,": ,:: ,'.,,',.3.21Q%": ..... ;.( :.' . :;.
;. 4.00%',>: .. :. '.:. :.'.: ;"/'/,: ,i,.. ,,':·:·':3:.' 3.46Q%.::: ,': l:. , . t.:,·;::,·. 0.87.5% .. ';" c':,
." ,:", '" .'<,., .. "::';:;' ..:,;';:', :,:3.585%'::·::· :::."; .1.', : ....
..... : .:'; .4:50%;': .;'. /:. : ,: .... :{ , •. ' .; ...;,':: ),::; "', ;'.3.1"10%" ;": ;:'.1,- '<:·:1'-.125%.:. ',i' . ,
...... 4.75%' ... ····:.: .. ' :',:'·,5.085%,:;\;,::,: ,' ... 3.835%." : .. :,,;',' :": .. " .. ;, ':
5.00%,' ;'.' -":.;.5.;335%:' ' .. ;',' .. ; ..... : , ",;:... .1.375%.:',
5.50%: .'. .', '.' .. 5.835%>· .. · '.: .,. 4.31.0%',,· " '.:' : .. 1.5250/0.···
6.25%' .'. .... .:, .. ·.6.585%:· :\:'.:" ';,. C·, '4.635%:·.'·.": ". .:" .. :,:., ,'.-
6.50% '..": ·,":;:'.6.835%' :.' ', .. ,':.' ;. '4.960%'; ·.;.:i:·' 1.875%·".
6.75%.'·, " '," 7.0e.5'M1.';. :":' 1: 5.085%',. '.' '. ;.:·,···2.'000%··:· ..
7.00% .. :'. . •... : 7,335%',,·; t •. ": . ':" .' ·:,·2.125%',:.\·
.:::.,.\., .:; ':.';;';,.':.7\835%5;;':",:.:' .:;::":(" 5,AfiOo/ri.·;:, :\:' '."':':: .. ,
:'.: '. ;";V75%";' : 'j;'::'; '::·.,:.:',,·8:085%:'',',::'.'.:', '::.'::n:.! :':;::';';,';':Z.500O/li'."::,;· I
':'>:.f.: . 8;00.0/0'.:. l·:,. 5.,7:;10%:. ';:::':r- ':.: ;'::,:;;.. 2.625%;::.;:>.,
;"'. :l',:" 8.2lr.'/«',:·f>, .c,':: ·i. 2t7500Al'·i::t;':·;
::.: ,;; ':-:, B.pOo/O:\:.'··, ;;',.: 8i83$.lIAi:,'; S.-96QO/c1.:;' ";.. ;"):,:-:" '2'.875%':'-':' ;':; ' .
.:- ..... 8i15o/i: : 6;085%h\·':'::'- 3.QQQ'Yo.' i'" '.;, , ,
".: '.' -9.000/.;";':'" ,.: .. :' ";:;,:ii:,l: 6,2:10o/,K::"::':-':' 3.'!12fi%·','Y,;·:
· .. ·/9.25%:··.', ... ".: '9:5aSo/ai';''': i '''':'''''''6.3350/0',''':'::'''' 'l:) .;.: $.250%:,::.' '.
: 9.50%·,:·· .. · : .' 9.835%::l:::· ",. ',;:6ASCO/a,"", j., .... 3.375%',.,,-·:"
9.75%···· : .' .. ' 10,{l66% .. ,:, .. '. 6.585%::· " ··.'.r'> ·3;500%0".' .
10.00%. . :" 10.21Q*,.:;· .; " ... 6.6$% ..... :· .. ":i< 3.575%':
10.250/0. . . ... 10.335%-.:.·, ... ··.6.685%:.; '.' :.,.·,/.3.65Q%·· .: ....
10.-50%: '0';": 19.460%:.'" '.' 6.7.35% .. , .. · .... :··.3.725%··, .. :
..... , 10.75%:·.",'; ." ", 1'0'.585% .,.::.; ; . " . E}.785%:···::' :'.',;' :'3.80P%·: .'
.. '11.00%:: c. (',10;710% '-.. : :';':'.6.835%' :".:' .;;': 3.875%· , ..
Page 1 of2
1922
Exhibit A
.... a.nttJ.' 8sta. ted ... AgreemCint
. effective .. day 01\1\1 V\ l/ . ,2009
Federal Reserve
Target Rate for
ContractVariable Rate Table
Overnight Federal Contract Variable Earnings Credit
Funds· Rate Rate Pass-through Rafe
11.50% .. 10.960% .' 6.935%' " :.'; 4 . .025% '.
11.75%' ,·.'·11 . .065%;·'····· .6.965%··: .,.:. ···.·4.100%,.··· .
12.00%' 11.210%' : .. ' 7,035%' . .'. )". 4.175.'10': :.'
'" 12.26%,',,< . :,.:11.335%",." :.", ", 1:085%:; .. ,;" .. 4.250.%·.,··:·:
.".'·.·:12.50%': .. ' ,: ..:·;·11,480%',::····. ',"< 7.13S%f··; ,··:.::::<::::oJ,325%,:'::: ..
. :' .:.:12.75%'.> .. ·.. . ·;·;·;./··.11.585%:},-·." \' .. <,;1;.;165%;\'· ',".' :.:,.· .. .. ::.: ,-
,:' .' t:;",:.1.1·.710%,·,·:·,:.:· ',;'.::",':' 4.47p%:l;, :7,
.. : :;:,' 13.25%:;:: (.,,:;., ,:·,;.;:,·;11.836%:-;}::·'p· 7<,285%::' ;.: ,i. :', ,-:' 4.550%:-.: .:?:-.
-):':.'.:;·,";.13.5Ilo/ci::;;·.:;;;(! .1,: i,";,) 1l "F:,;;',i.':: 7.;$$%';:\;,' ::):/ f":,,:, <! .. ',;,;:
,::: ... ,,: 'if::\ .... 1'.385%:, A':·t' :;:./{
,:.1.". " 14;00% ' ..:::.",:: ::':r": t-. 12.21.00/ll'}' ...,;:; .:;, '! ••:,,'" 4-:,1:7P.o/lI.':;·':;.
' .. , .·c·' ·14.25%',·;':':'.;\ .. :;:
'. :,·f,14.500"'.·· .. :··L 12.460%'·{!'·);: .-::.;;
.: .-':; 14.75%":" -:<·:: •. ..
.. . 15.00%.... . ".;:12;.1.100/0":' •. -:. .'.'. ':;'.i"; 5 .. 01fl%:'·:· :'
:: 15.25%· .... .' )::;.;:>:·,.7.6.85% ... ..,.·,.-... ':.' .. >'.;
15.50%:· \. ;. '. 12.960%, J,: J. '.' 6.225%" ' .. :'
15.75%,.' ' .. ". 13.085% : 7.785%' .'.: ..:..:.'. 5.S0Q%.
16.25% '. 13.335%::,· .' .... '7.885% .:':,. ·50450% :.
"f: :': 16.7S%- .. :',',,; ;·::,·;7·,SJ;I,&%:;, .. ;:t' .'f":"';-:· 5,eQO%':-",·,:
:; ': -::: ·17.QQ%·".;' ;.,-.:' 13;1!.1:00/0'},',.\\''!': S.035.%:h' .. "f,: :\,:·;:;:,:· ... .
. i:;,'-. 17;25%::;:·0 .. 'of' i'.'i·,-, .' ,; ....
.... 17.50%· 960%:;':;";::';'.'::. 'i: .;';',',:;:;·8.11 5.825.%"'::")"': ;
c: ',' '.: 1'1.75%', ;.;,!,:" '';'/':;'''. ',.': ,'J :'.:: 8,.185%1',. • ... ;': ·t.:,'·,.·;', 5.9900/0
. ':.:,.':18.00%;\":' .', '::"h: 14.210%:./:·,';::' .,':, .:.,': 8;2350/6-::· . . ,." 1.:::;._. 5..975%· .. ·;:· • .-
, ,'" :.18.25% ' 14.335%'. :.... 8:285%':;: . .
. 18,50%/' 14.46£:),%':':"'" :;, 8.335%' ", . '. 6.125%.'
18.75%" 14,565% 8.385% ';. 6.200%
19.00% 14.710% . 8.435% .. 6.275%
19.25% 14.835% 8.465%: ", 6.350%'"
19.50%·' .. :., 14.960%' a.5a5%'--': ".,
19.75%;' ':'.15.085%' ,:. . 8.1)85%.' .' , .. ': .. ,'.
20.00%::'-' .. :. 15.21'00/.)'· .... : :: '" 8.()35%· ." '. ·:6.575%' '.:'
"11'1 the event that U1etarget rate Tor overnight federal fUnds as announced by. the
Open MarketCommlttee of the Federl;ll Reserve of Governors Isa range of "a lues
and not a speciffc·Federal Target Rate as sh()Wn in the attached table, .united
Western Bank Ism USta the lower Federal Target Rate within th$announced range to
establlsn theContractVariable Rate, El;irnings Credit Rate and Pass Through Rate.
Page2of2
1923
TabC
Exhibit 72 A
1924
COpy
FIRST AMENDMENT TO AMENDED AND RESTATED
SUBACCOUNTINGAGREJtM:ENT
THIS FIRST AMENDMENT TO THE AMENDED. AND RESTATED
SUBACCOUNTING AGREEMENT (this made and entererl.into as 'of this
24th day of February 2010 (the I'Effective Oate"),by and between, UNITED WESTERN
BANK®. a.federal$lwings bll,llk ("Bank"), EQUITY TRUST COMPANY ,a South Dakota trust
cOl11pany("ETC"); EQUITY ADMINrsTRATIVE. INC., an Ohio corporation
("EAS"), and STERLING ADMINISTRATIVE SERVICES, LLC, a limited liability
("SAS"a1Hi, coI1ectively with EAS, the "Companies"). TheCompanies,. ETC and Bank
are referred to herein each. as a "Parly" and aSthe "Panies." Capitalized temlS used
and not ·defined in this Amendmerttshall have the meanings ascribedlo them in the
Subaccounting Agreement (as defined below).
WITNESSEtH
WHEREAS, Bank, ETC and the Companies. are parties to that certain AMENDED AND
RESTATED SUBACCOUNTlNG AGREEMENT dated JUlle 27,2009 (the "Subaccou)lting
Agreemenf'ywhereby,amollg other things, ETC and theCompalliesmaintain Bank Accounts at i$,
Bank for the benefit of Custodial AccountHoiders, and the Companies act as agent for Bank to
provide Custodial Account Holder record and serv:ices with respect to the
Custodial Accounts alldbalances maintained in the Bank Accounts for the benefit of the
individual Custodial Account Holders. .
WHEREAS, the Parties desire to amend the Sub accounting AgreelUent as described in
further detail in this Amendment
NOW, ·THEREFORE, for ·other. goad and valuable consideratioll,the receipt and
sufficiency of which are hereby acknowledged, the Patties h.ereby agree as foJlows:
1. Thefollowillgsentence shalibe added attheend of Section 1 of the Agreement:
'IForpurpbsesof this Agreement,13ank AccoUnts shall include· any 13ank,f\.:ccQunt
deposits participated toThird Party flanks pursuant tothe tenns of this Agreement:'
2. tl1e second paragraph of Sec;tio1'l 10 of this Agreement is hereby deleted in its entirety
and replaced with thefol1owmg paragraph: .
''Notwithstanding anything to the contrary herein, written consent of the Banlds required ..
prior to the Companies andETC participating outBank APCOunt deposits to any Third Party
Bank (as defined below), whiCh consent shall not be unreasonably withheld. In addition, Bank
may propose that the Companies and ETC participate out Bank: Account deposits to. a Third
PartyBank,and thewrittell consent ofthe Companies and ETCsb{Jll be required prlottosuch
participation, which consent shall not he unreasonably withheld. A "Third Party Bank" is any
federally insured bank or saving at)d loan institution chartered by an agency of the federal
government or any . state government. that is agreed to between the .. Parties and (x) has. a
composite rank of 75 or higher as published by IDC Financial Publishing, l11c; ("IDC") from
1
1925
time' to time or (y) if such bank orinstifittion is 'not rated by IDC.suchbank, or institution,ls
"well capitalized" that la, in 12, CPR S65A(b)(1), hut, subject to 12 CFR
565.4(c». Any Patty proposing participation orBanIc Account deposits to aThlId Party Bank as
provided,herein (th¢ "Proposing PartY;) to Fiank: or the Compani(:$
the ea.s¢ may be; (the ·'Receiving Party") detailed information, regarding theproposeq,
,participation, including tbeproposed amottntof Bank Account deposits to be participated
thc,na¢e of the Third Party Bank to accept the deposits, the proposed terms of such 'rliiTd Party
Batik's participationand:infOlmati<i9. reglirding the regulatory $tat\ls of-gq.ch ThIrd
Party ,Bal,1k (1:b.e "P!irticipationJnfonnatiori"). The Receiving Party-shaU, within seven: business
days after the date orits receipt of aU' PRrticipatil;m, tnform,ation (st;l.cb
the Period'Y)., pt9vide ,iIi writing to the Proposing, Paity '(a) ,the Receiving Party's
wrlttenco.nsenttQ thepTCIposed participation, or (t> )astateD'lent that the. Receiving}larty wi1lnot
consent to the parV-cipaiion,togcihet With reasonabled.etails· itS t(lgrant
consentJn eVenfthe Receiving party fails to respond ,to a, participation request within the
Response Period. the Parties that the Receiving patty's: cons,em to the proposed
participatiQn ha$ Parti¢SWiU ta1c.e·. aU reasonable or necessary actions,
including ,opening acco\lntsat Third Party Banks and,caccnti;ng ang
forms customary necesst¢ydo¢iJ.Inents:i:eqllired by any Party ot the
Third PartY Bank, to allow the participation' of Bank Account deposits as provided forherehl.
Bank Custodi!l1 Acccnmt, ao14ets have the right; theit$oleoption, to direet
the ETCtQ dep,osit another depository institution; "
howeverj ETC and the Companies- teasonableeffort$' tp hl;lveeash,
tQ Cllstodjal Accollilts; retained at Bank (ora, Third Party 'Bank if Bank has
proposed or consented toparticipa1eoutany or all of the Custodial}jeposits as provided above),
The Companies the tight to :t,emove part;icipiited q.ut to ,ll, Third Party
Bank'ui1derthis time' af\¢t: Cil receipt by the Companies 'or EtC. of a rating;
report published by IDC indicating a composite rank fot 1'bitl\ PariyBIIllk of 740t lower,1f
sucbThil\i PaJ.'tY Bank, is rated by Ipe, 0,1' (ii) if such Third ,Party Bank is'11(>t rated-by lOC, the
Comptmies ot ETC become aware' that such Third Party Bank is not ",ewell that .
term is'dermed in 12 CF'R to 12 CPR 565.4(6)}.ineither of whichQase
$h,all 114V¢ such. deposits to Bank ,or another Third, Party Batik
puxsuariito the terms oUhis Section 10. In the event tba(Ban:k bus prop()sed ,otC01isented to
pariiclPfrt.e out deposits. in: the Ba:Qk .Accounts to ,a Thil'dP.arty :Bank that pays interest,
subaccoimting or other ,administrative fees Companies with respect to the deposits
participated out to, $UChthird Party Bank (the "ThitdPatty Rate") that is. itt tl;te
of tbe.applica:ble Contract Variable Rate as, tbenfu effect, the Companiesf on the one
hand,and Bank, on the other hand; wm $plit the.bClfie.fit of the t;li.t1erence oetween Sl)ch higher
Third Party Rate and theapplieableContra:ct Variable Rate 50/50. m the event that the Third
party Rate, is; in the a:ggregate. less than the applicable Contract Variable Rate, Bank shall
teSp{)osiblefut making the CompanieS whole for the between such Contract Variable
Rate and suchlower Third party Rate. The terms of this paragraph shall not ai)y
rights of the Custodial aoldet'$.'" , '
3. The last sentence of$ection 11 of't:he be deieted i11 its en-p.retY anQ.
replilced'with'the following sentence:
2
1926
Agreemf)nt may be terminated by theCoUlpanies or ETC upon thirty (30) days'
prior written notice to Bank at any time after Bank files with the Office of Thrift Supervision, or
any successor regulator designated as Bank's principal regulator,any thrift financial report,or
replacement Or successor report ifl10t a thrift fmancial which report teflects that Bank is
neither ''wen capitalized" nor "adequate1y capitalized," as those terms are defihed in 12 CFR
565A(b)(1) and (2) or in any replacement or successor federal regulation published from time to
time and at any time by the federal government of the United States of America (a "Triggering
TFR;'), Bank shall provide the Companies and ETC notice that Bank has filed a Triggering TFR
within three (3) business days of such filing."
The Parties agree that all other teJ.ms or conditions of the Subaccounting Agreement
shall relllain .in full force and effect aQd the Parties reaffinnthe same. The Subaccounting
Agreement, as amended by this Amendment, contains the entireunderstandmg of the Parnes
with respect to the subject thereot; and supersedes all pdor agreements and
understandings relating to tlie subject mater thereof.
This Amendment shall be binding upon and inure to the benefit of and be enforceable
by.the Parties and their respective successors, assigns (including· any direct or illdirec:;t successor
by merger or consoliqation) alldadministrators.
[Signature page follows.}
3
1927
IN WITNESS WHEREOF; the Parties have enteredihto this Amendment as .of the
date· first written above.
04W66, 00000.1,1031405
B
;. /Uit. / . . ....
y ....... ..
Nan.c.M '2le'A
CFo .
EQUITY TRUST COMPANY

Name:
Title:· C P,c
UNII'BD WBS'I'BRNB
·BY-;,...·
.Name;

1928
TabC
Exhibit 72 B
1929

fiil$.S:2CONi) AMENDMENT T(l m ItEstAtEJ)
SuaACCOUNTINGAOImBMBNT(tIrls is made, and entered into as of-this 7fl1
day (If Ma1: 2010 wE$.tmtN
mJJf:l'Y 'fRUaT

S'rBltLINO APMn4lSJ:'R.A1'lV8. "T company ( SAS
: 1.;b.e "COll$mdef1). and
each ,'\ amt, tlij,."Parties:?. (entl$ USf:4. and. Ii.Qt ,
A..... ....... ....... t,. .. I'1'1,;", •• the _mini 'ft.. i11 ,......., '$' l»t A'" :", od t,·
p;.., .. " .... .... " ' ,¥", " ""a,q.".' '" 'll " .... \$
dl:(.'Pned belOw), '
WlT.NES,,$:em

Amendinentto Amended.andResm.ted Siihae:Countingkgreement qatedFebrua:ry: 24-. 2010 (the
:dllibAAcourttihg AgreeDlenfi). _Oila' 'EAa'an.4 t.be m3ln.Wm
,BlJri,k ACf,QuntS ,at ilank.fot :tbebene(lt of ACp()unt Holders andthc Compal1iesact.as
' ...• t" fbi' BI\nk .to pfilv.ideCUstOdill A¢ount Hbldetrecota keepiitgand c¢t1i.in.otnerS6fi'ices
" and ces m',;, " .'
.. ........ ' " , .. .1,11 .. "
A,ccounfs by 'the individual OustodIaI Aeoounts"
BrC 0.£
fhndsdn Custodial AccoUi\t$ :(the. ({TJiiid EWBank
, . .. F' , 'd 'U\' 'th. . 1"I'iL: .. accotdance with ibesecd '. . . h·' " '.::' ' ' '1'0
DM10S1t Wljj.,q, ..... 'H • ":':": .. ....': ,,,,on ,O.L,
OIllie S\J,baccouuting Agrecment(sueh the Bank Dc.posit
/nlp1\4¢.PQJit nurcifartrBank Deposit
sllch deSire to' theSUb3.ooounting
•..
NOW. THEREFORE. 1h 'by Sank to
.tot otlie,rgQ()d. 'thO: of
to theSubaccounting·AgreC)metltinthefoUowlrtg.
respects.
1. ofSeetion 1 ofth!$ SUhlk:ocfl,intin.g sh$;lll)e.
delt;te'd in
balances in Bank'Acoount.$ •. :et¢
fihillJ' (th¢ with9uttheprior. written .approVal ofBank;;'
the ThirdPfltty witb'tlle 'thitdPartyBank shall not
apply n()tv.'iitli$tafidlng ··the.
1930
contrary. The rights andobtigatkms ohlle Patties the secQiJd"to-Wt
selltencesof tne thlrd P!»tY .B@kDeposit PrQViliion .$AAll J:lo* ,.IlPply any waY tQ (he Thlt4
Party Bank DepositFunds as deposited with the ThitdPilrtyBanlc
2. The following paragrapbshall be added as a third paragraph to Section 10: Qf the
Agteement:
... ,. the, '., .. '
'tfurt the . . ." . ,',' ,oqt.of any &uch1\til,QS pmuantto, this
to the' rightc;lUldobl'gations or the Parties under ,the third"
Atiy,',mnds
,but tQ ' .. ,slu\tl I1Ql. ' apply, Cap.
notwithstandinganytilingberein" to the. oontnltyi ,Notwithstanding anytlimg to the
ETC an4 the CQn1panies tp
fi,lnd,S'asdjs:c\lSsed ,,41· t;l4s to thee1Ctent tPat · W()\1,IA
reduce the cash. of Custodial Dep.osits belOW an atn0untcqual to the Final
Deposit Amount (¢l by i!Ildfuitilly in the
,.,'tn a(lditiQIl PartresshaU use goodfaiihe{f9rts to
qpPorti:tnitiesfrQnt to ofieot· mote Third
PattY Batil<sQffundsdeposlt¢d, in B,Mk Acco\lnts:'
of Ag1'eemer\t$hall"
remaihitlfull fotceAAd. ,effect alld the slinte. ,,'I'M$: Amendment shall \)e.
upon and iuure to the benefit of and he enfOrceable by the Parties and their respective
(mcludingany ditt<9t.Ql' indireQt by merger· 01' c()llsolidation) It!1Q
administratof$. '
2
1931
1932
TabC
Exhibit 72 C
1933
.. .WESTERN

·.J.JI. '. UN .. IT.E D
BANl{0
October 26,2010
Mr.leffreyA .. Desich
. President
Equity TrustCompany
Equity Administrative me .
. St ,c_ Administrative lLC
. e'l'Ulig . ...........,
225 Bums Road
Elyria, OH 44035
R. Peoples
Chairrrum,. President &. CEO
tel: 720-956-6576
faX 1186
illf.'OI!les@U\vballk.com
He: Amended arid
,amended, .. l] .. West¢tD BQnk, Equity Trnst COQlpany;Equ.tt
Ad . . • • trative Services .... S" '. . . LLC'. . 'j&.-
noms -'. -. '1:11... "itO,,':;, ,-ole
"SubaccOuliugAgteement")
Dear Mr. Desich:
United Western Bank (the ''Bank''), Equity ThlSt Compooy e'ETO',); Equity Admlm$tra:tive
Services, .. Inc. ("BAS") and Sterling AdminiStrative. Services, LLC' eSAS" and, collectivelY
with EAS, the"Compames'') are parties to the above rererencedSubaccounting Agreement,
whereby •. among other thiJlgs, ETC and the Companies, J)l£tirttain Bank AcCOllhts ataank for
the benefit of CUStodial ,AccountFlolder:s and the Compani¢$actas .agent for BankfO provide
Cus.todial Account Holder record keeping and certain other services with respect to theaceount
activity by CilStOclial Accounts and balances mainUlined in the. Bank Accounts by theirtdiviciuaI
CUstodial Aceo.tU1tS.
Bank's parent company. United Western Bancol1Jt Inc. ('1JWBK") is cUJ.tently mnegotiations to
enter into a binding 'agreement (the "Capital· Investment Agreement") with. varioUs 'investors
pursuant to which such investors will purchase equity . capital of UWBK. for an aggregate
purcllase price in excess of $200 million. As a condition. to. enteting mtothe Capital
Investment Agreement, the investors have t(!quested that ETC and the Compnnies enter into
this letter agreement.
For good and valuable consideration, the receipt and sUfficiency of which are hereby acknOWledged.
the parties hereby agree as follows:
Notwithstanding anything to . the contnuy in 1heSubaccounting Agreement; and subject lathe
tenus and conditions of this letter agreement; dnting the Period (de(med below), ETC
and the COD1panies agreenot right to tenninate t;heSubaccounting
United Western Financial Center
700 Seventeenth Street, Suite 2100
Denver. Colorad(l 80202
. wwW.uwbancorp.com
1934
aCf,!orchmce Witllthelastsentence0fSection 11 oft\ie Subaccounting Agreernentirt the event
Bank wetetofi1ewith the OfficeofTIuiftSupervision"artytbriftfinatlcialrepoft,orrepIac:ement
oIt Sl1CcesS9fl'CpottifriOta thrift financial report, whieh,reportsreij¢CtSthat the Battkis
defined in 12 C.F.R. § 565.4(b)(3). For the avoid$1ce of doubt. ETC and
, theCompaniesatenotw!:living::my right, duringthe:Q.estrictecfPetibd ot otherwiSe, to terminate
the ,$ubaccountingAgreementin ,the event, Bank. were to file &feport reflecting that13ank is
or "critically defi:riedin II C.F.R.§
S65.4(b)(4)and(S). respectively, ''ResIricted Period" means theperlod.beginning ,as of the date the
,Agt¢etl:lentifJ entered intotlild ending <mtheearli¢t of (a)the date the Capital.
liivestmet1t Af!reement is tenuinated.(b) jly! date thetransactionsconrempJafed by the, Capital
'"CapitalTransac,:ionClosing"1tJnd(c)December31,
2010. Bank shall notifY ETCifandwholtlleCapital InvestmentAgteetn¢l1t is entered. mto oris
tertnii:urted or the CapW Tn:msaction Closing uCCUJ:S" , in each'case within 48',hours ,after,theevent'
Deems.
agreementS' set forlbJiltWs
ftldher Agreement is not'entered mtoon·.ot bef'oteNovembet 15.
2010. The parties agree'that aU other tetmsattd·conditibnsoftheSubaccOilntmgAgteement shall
remain in full foreeand effectattdtllepartres letter agreement slialtbe
biridingupon andinure:to the benentofand be enforceable: by thepamesartdtheirrespecti've
StlCCes$Ol'S, assigns (including any ·ditect or indirect SUc.cessor by merger or
cQrisolidation) and ·admittisb::ators. . .
Capitalized teonS not otherwise definedberem sMUhave the tneaning ascribed to them, in the
Subaccounting·AgreeIllent
111e dtilyatm10rized parties designated below signiff their the tmns·and
conditions containedlterein tbtoughexecutiort of this lett«agrCei)lent by signing as indioated
beloW.
Sincerely,
UNITE}) WE$TERNBANl<
1935


T'ttle:t! FO
slERUNGAPMINlSTRA1:tVESERVlCES,u.c

.• flA-"'--
TItle: CF?)
EQUlTYTRUSTCOlvtPANY
1936
TabC
Exhibit 72 D
1937
THIRD AMENDMENT TO AMENDED AND RESTATED
.SUBACCOUNTING.AGREEMENT
THIS THIRD AMENDMENT TO THE AMENDED AND RESTATED
SUBACCOlJNTING AGREEMENT (this "Amendment") IS made and entered into as ofthis
day of December, 2010, by and between, UNITED WESTERN BANK®, afederalsavings bank
("Bank"), EQUITY TRUST COMPANY, a South Dakota trust company (''ETC''), EQUITY
ADMINISTRATIVE SERVICES, INC" an Ohio corporation ("EAS"), and STERLING
ADMINISTRATIVE SERVICES, LLC, a Texas limited liability company ("SAS" and,
collectively with BAS, the "Companies"), (the Companies; ETC and Bank referred to herein
each as a "Party"and collectively the "Parties''); Capitalized terms used and not defined in this
Amendment shall have the meanings ascribed to them in the.Subaccounting Agreement (as
defined below). .. .
WITNESSETH
WHEREAS,Bank, ETC and the Companies are parties to thatcertairi. AMENDED AND
RESTATED SUBACCOt)NTING AGREEMENT dated June 27, 2009, a.$ amended by that First
Amendment to Amended and Restated Subaccounting AgreeIllentdated February 24, 2010, and
as further amended by that Second. Amendment to Amended and Restated 8ubaccounting
Agreement dated,May 7,2010 (t'he Agreement"), whereby, among other things,
in· connection with. the primary purpose of facilitating the purchase and sale of securities and
other investments by their customers and not in a capacity as a deposit placement service, BAs
. and the Companies maintain Bank Accounts at Bank for the benefit of Custodial Account
Holders, and the Companies act as agent for Barik to provide Custodial Account Holder record
keeping and certain other services with respect to the account activity by Custodia] ACCOUnts and
balances maintained in the BankAccounts by the individual Custodial Accounts.
WHEREAS, the Parties de.sireto further ameI1d the Subaccoun.ting Agreement as
described herein.
WHEREAS, the Parties acknowledge that time is of the essence.
NOW, THEREFORE. for other good !ind valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereby agree to amend the
Subaccot.U1ting Agreement in. the following respects:
1. Effective for the two-year period beginning as of December, 1, 2010 (the
<'Amendment Period"), Section 6 of be deleted in its entirety
and replaced with the following:
"6. Notwithstanding anything herein to thec;ontrary, the Companies shall use
their commercially reasonable efforts to ensure that funds deposited in the Bank
Accounts do not exceed 10% of the total customer account assets held by the
Companies all behalf of theircustoiIiets (the "Ratio"). In furtheranoeof the
foregoing, the Companies shall use their commercially reasonable efforts to
prevent the average daily balance iri. the Bank Accounts during any calendar
1938
monthftom e2tceedirig the Ratio. based on the average totai 'customer account
balances held. by the Companies. during that ttlQnfu, ''Monthly Ratio"), ba$ed
on the most recently avrulable data.· The monthly repod referred to in SectionS
above shall (ll) incJu<fea certification. contirnllng bpth Ratio and the Montl1ly
Ratio for the preceding calendar'month as well as. the' averagenuniber of Active·
Accounts (asdetennined below) for such month. and (b) acknowledge that such
certification will be·used by B'arik for pu:rposesof reporting·to the FDIC, and that
it may he relied UP(ln by bank regulators during 62tantiilatiom.of Bank. At
nPtime shall any funds depositedin the Bank AccQuntsbe helclin time depQsits.
shall pay interest(;)n lnthe. aanl( Accounts in the amount
forth on EXhibit .. attached hereto (the "Pas&:-Through Rate") .. The Pass-
Through Rate shall be' adjusted from time totinie pUt'$uan.( to Exhibit based
on the Federal Reserve Target Rate for oyentight Fe<iefal funqs
(the "Fed FUnds Rate"). The full amount of such interest paid on the Bank
Acc::ountsshaU be passed thJ;:ough and paid by the CQIX1panies to tbe Custo(}ial .
Accounts forthe sole of the Custoclial Account Holders.,
Withiri.ten: (10) da,Y$ after receipt Qf the monthly report refetredtoin
Section 5 above With respect, to eaph calendar lilonthbegitmii1g with December;
2010, Bank shall pay the' Companies a fee (the, "Service for the
keeping services provided .J)ythe Companies hereunder during such month. The
SerVice Fee for a month shall bean amount equal to $20.35 multiplied by the
number of ,Active Accounts for that month. For purposes of determining
the Service> Fee for any givencalen:da.t month, the average number of Active
Accounts shall be determined by dividing (A). the sum of the number of Active
AccQunts as of the iast day of suchmolith and the last day of the irrunediately
preceding month, by (B) two •. In no eyent, however. shall Bank pay a.Service Fee
for any monthonanayerage number of Active Accounts. of more than 75,000.
N(j otlterfees. o(anY Iiafilre sba.l1 be due to Jhe Companies for .
services provided hereunder." .
2. Duting:the'Atnendinent Period, ,Exhibit "N' of the Subaccounting Agreement
shall be amended and restated in it$ entiretY\¥ith tlte E2thibit "N'attached hereto.
3. During the Amendment Period,. theterin "Contract Variable Rate," ih each
instance it is used hi Section 10 of the Agreement, sball be deleted
with the term
4. Unless othetwiseagteed to in writing by the Parties, for the remainder of the
Tenn Iollowing C:li:pira.tion of 6; Exhibit "N' and Section lOot
the Subaccounting Agreement, each as amended hereby, shall revert baCk to the prOvisions of
such.sectioilsand E:li:hibitas in effect i.iiunediatelypriottobeing amended by this An.:tendment.
5. The seventh sentence of the second paragraph of Section 100fthe Subaccounting
Agreement is hereby amended and res.tatedin its entirety as. follows.:
2
1939
"Bank acknowledges that Custodial Account Holders have the right. at tl)eir sole
optiQn .• t o d i r ~ t the Compatiiesand ETC to deposit their respectiVe funds with
another depository institution."
6. The. Parties agree that all other terms or conditions of the SubaccQurtting
Agreement. shallremliin in full force and effect and' the Parties reaffumthe same. T.his
Anlendment shall be binding upon and inure to the benefit of and l>e' enforceaole by the Parties
and their respective. successors, assigns (Including any direct orindir¢t successor bymetget or
consolidation) and administrators,
[Signature page follows.]
3
1940
Dec061006:21p
p.4
IN 'WItNE8SWHEREOF, the Parties hereto have entered inte) this Ari:tendment
as of the date
EQUIrt;,.@TRATlVE SERVICBS. IN""
( ........ :.

Name:! . / '
Title:
StERLING ADMlNISTRATlVE SERVICES, LLC .


Name:/ .
Title:
EQUITY TRUST COMPA_NY

Title;
UNITED WESTERNBA.:"lK
4
1941
rothe k.nep.ded and Res(aieti Subaccotmting effective as of December -'
2010, by and /lm,ongUilitedWe$ternBank, Equity1Tttst Company •. Equity Services; inC:.
and Sterling .Administrativ.e Services, LLC (the "Agreement")
Defi.nitions used-and not defined in "A" have the meanings.
ascribed to them in the Agreement) .
Ptl$s-T'htQilglt Rfite- The rateo! actually paid and credited lothe: Bank Accounts as
adjusted from time to time ):?l,lndS Rate. Which shall be
passed through and paid by the C1Qmpaniesto the Cusioc.:\ial Accounts for the benefR -of the
Custodial Account lIoldets.
. The Pass-Through Rate shall be adjusted from tiine to time in accordance wi.th the
attached hereto based upon the then-curtent Fed Funds Rate as published in, tbe Money Section of
The Wall Street Journal on the last business day of the month preceding the month du:rlng which the
Pass-Through Rate and Multiple will becalcwated.
1942
Ta.bC
Exhibit 72 E
1943
EQUITy.TI.tUSTC()MPANY.

Mr.James ItPtQples .
Chief14ecotive OffiCer·
United Westei'nBank
70017t'iJStr¢et . .
Snite2100
co 80202
EXHIBlTB
1) .• · .. Restat. 'ed Sub".- ..... 'f'i ....... Aorf:'-enfthade as '-tJtn:te 2:1 20':09' 1;-; ... , :.._;1. b' '.,.,;., . '.
... '. "', ........... "" .... "'"E:! . ... ' , .... 0. ..•. .. "':oJ' lUlU.
.Equity·Trl!stCOnipany ·and·o1hel"$'. (lhe J.FSpbaceoutrt.fug· .
Agre_e;nt';)
Oear
M
. ". ·t.e time and a. ttention YO. uhav, e OOttJ.n1itted ·to briefin . au '0;...' t ... m..... ..... r<.A'. .
. any . .. or '".at , . . .' .. .... " ," ...... ' . g .. l'
tr:ust;;)8$"tQtlie the capital .
ratios, tb.ccUttent state of theBan1.c and its tegIl.1ators.and the et'fe)!ts'ofUnite!i
Westem·BanQOq), Inc. (4UWB:I{.'f) the UWlJK capital
to the Su1)aecoW1ting M. am;ended Iettera,greemdlt,of-OctQber 26, 2010 (the
"OotQber Amendmentj, the: parties to the Agreemetlt lJ.ave
anything to the aml
aubjecttotbe letter .
Period (define<l1:Jelow)f EtC anO agtee'not to their right to
tetm.fuate I\.gtl:ettlent ip accordance wit.lt: the last senteIloeof
Section 11 of the. 8uOaC,gOlmtiiig Agt,eem..e01iQ. the event Bank Were.'.to file witbthe
offi; ofThrlft any
. ' . rt: ".enola· which tepo ..... tefiect thattheS'k '. '. ..
11.. ,.·."'r-"':)... . . . " .. ' .. an 1'$
''unde.rcapitalized!.t, asdetined mI2 C.P.R.§. thellVPidailce of
do",llt, .ETC.aAd theCompan1es !h'enot
PenQd. .or othqwise, t() Subaccounting Agreement in tbe eventBank
were to file that Bank is or
'as de:f1ned in 12 G.P;R.§ 565.4(1))(4) and (5}i
respectively. "ReStt!oted :Period" oftb.e the
is wt¢ted inttJatide4ding 'on the earlier.6f(a)the
date the Capital Investment Agreementis wnninated, (b) the' date
by the ttte QOtiSUtnmilted; (the
TtanSactioD Closing"), 311.201 O.B.1;IJ)k shall notity ETC if and
whentbe'Capitai In.vestment AgreenteDt enterM into <tt.is. <It the
Ca:pita) Qccms •. ineaeb case within 46lU>ws aftet
occurs;>;
a' "
1944
It is our understanding that theSarikm:ently filed. thrift financial
. no longer meets capitalized;' urider 12C.F.R. Section 565.4(b)(1 Xii), The
···Restricted· Period, as defined An)endbletlt, terminates on December'31
t
20W ifnot
terminated earlier as provided for in the October lJecauseEqultyTrnst understands
tlu¢ the Bagk.l$ cooperating with its te$Utators and.is very close to securing to remedy thjs.
sit1$ti,on. Equity TI1l$t toy @d, by c:leliv¢O' of this dQCS., ·t"e October .
Amehdmentw delete 2010 as the operative reference date in tbe:definitionof
. Restrictive Period .and;instea<:l, .inserls "(el Febl'Ualy IS, 2011" in the October Amendment as the
absOlute outside date for the tenl'tination ofllieRestrietiv.e Pen<4
If the above .i$ oo.w.;istent with YOllt' lJ:n4er.staD.ding..plea$e YOur agreement.by signing
fnthe space below and retumiilg acop:yofthis.letter tom), . .. . .
MiClulelOea
Ptel:!jdcm.t
EquityT
l11
st·COt:npany
·agreedas of die date tlrst forth above:
·Uriited Western'Bank
By:
. . . .... ....
Chainuan of the Board and Officer
. 440.323;5491. FAX 440.323.4529 • 225 BURNS ROAD • BOx. 1529 • ELYRIA, OHIO 44035 t·
1945
TabC
Exhibit 73
1946
_INC.
December 22, 2010
Guy A Gibson
Chairman of1he Boatd
United Western. Bank
700 Ith Street, Suite 2100 .
Denver, Colotado 80202
Re: SubaccountiDg Agreement dated FebnuD:y 1,2010 between United Westem Bank (the "Bank") and
Trost Company ("LTC")
Dear Guy,
11tauk you:for takiDg.1ime today to discuss 1M abow-reforenced agreement (the ".Agreement") with me
audLincoJnTrost's couu.sel, David Rjgsby. As discussed, § 4.3 of the Agreement provides that LTC
. may terminate 1he Agreem.ellt upon thirty (30) da}s' notice in the event 1hat the Bank ceases to
meet the definition of "well capitalized" as tbatterm is speclficllly defined in 12 CPR. §56S.4(b){I)(it).
It is our tbatthe Bank recently filed a Ca11ITFR mport reflecting tbat the Bank no longer
J;neets the. de&dtiOlt under 12 CPR. t S6S.4(b)(l)(ii). However, the language in § 4.3 is
pennissive rather tbanmandatoIy. Because LTC uuderstands that the Bank is coopm:ating -with its
regulators and is very close to secu:ri.ng capital to remedy this situation, LTC does not intend to exercise
its right to termiDate the Agreement pursuant to § 4.3 atthis time. LTC requests 1batthe Bank keep LTC
apprised of all materlal developments with IUganl to its capital aod LTC specifically reserves its
right to termiDafe the Agreement puisuarit to 14.3 of1he Agreement in the event the Bank's capital.
situation WOIS8D.S or the Bank does not return "In "\von capitalized" status (as defined in the Agreement)
by January 31,2011.
Best
Bob Beriault
President
Co;· :. Ted Aba:riotes, . .. " .'
. ... -
. .. Dpic!' Ri-by. ... .. ',: '.. .-
• to • ". '
.',.: ,",
" ...... ...
: .. '.. . .. "
,0 ......
... "
or.' : •• ' •• 0' ... :.: ::::: :.···t'. :::\ .... ,. . ·t .'.' , .. " " ....... ' ... '.
., .: '0" .J ',' ." ". : .:.'. . .;.
I'lobert aeriault Holdings, Ino.. 717 1'NI street. Denvar OO.80202'S318 • ph 3Oarfl6WOO7 • fit 3D8..ft15B.SOO9
1947
. -... '
. .
TabC
Exhibit 73 A
1948
SUBACCOUNTING AGREEMENT
Lincoln Trust Comgany,a Colorado industrial bank with trust powers ("LTC'j, having its
principal offices at 717 17 Suite 2100, Denver, 80202, and United Western Bank
C'Bank"), a federal savings bauk, having its principal offices at 700 17th Street, Suite 2100,
Denver, Colorado 80202, hereby enter into this Subaccounting Agreement (the "Agreemenfj
this lst day of February, 2010 (the "Effective Date").
RECITALS
WHEREAS, Bank is a member of the Federal Deposit Insurance Corporation ("FDICj
and a FDIC-insured institution; and
WHEREAS, LTC, as custodian or directed trustee, provides custodial and related
services to employee benefit plan, individual retirement plans and other qualified plan accounts,
acts as custodian for self-directed IRA accounts and other retirement accounts (the "Custodial
Accounts") for which the account owners ("Owners" or "Clients") have sole responsibility for
the investments within such accounts, and such Owners have instructed LTC with regard to the
cash or funds ("Funds") held in their Custodial Accounts to deposit such Funds with FDIC
insured institutions with which LTC has entered into agreements for such purpose; and
WHEREAS, LTC, as the custodian or directed truste.e for the Owners, will deposit
Owners' Funds in an omnibus account described in more detail herein (the "Deposit Account")
with Bank for the benefit of the Owners pursuant to the terms of this Agreement; and
WHEREAS, the Owners desire that their Funds be insured by the FDIC to the fullest
extent possible; and l
WHEREAS, the aggregate balance of the Deposit is expected to exceed
currently applicable FDIC insurance limits; and
WHEREAS, FDIC regulations provide that deposit records of insured financial
institutions must disclose the existence of any relationship that provides the basis for additional
and the . details of that relationship must be ascertainable from the records of the
Bank or by an entity that has undertaken to maintain such records; and
WHEREAS, LTC desires that the Funds maintained in the Deposit Account be insured to
the fullest extent provided by law for each Custodial Account and the Owner, and consequently
records and statements must be prepared for each Custodial Account and Owner regarding the
status of each Custodial Account which is within and a part of the Deposit Account; and
WHEREAS, Bank could provide account holder record-keeping for the Custodial
Accounts and Owners or obtain such services from a third-party provider; and
WHEREAS, LTC is willing to act as limited agent for Bank to provide record-keeping
and certain other services with respect to the account activity by Custodial Accounts and
balances maintained in the Deposit Account by the individual Custodial Accounts; and
WHEREAS, Bank and LTC believe it appropriate to enter into an agreement that.
provides for LTC to act as limited agent for Bank to provide account holder record-keeping and
1949
certain other services with respect to balances maintained in the Deposit Account by the
Custodial Accounts and the Owners, for which Bank will pay a fee to LTC based upon the
aggregate monthly balance of such Custodial Accounts; and
WHEREAS, in order that the interests of the Owners in the Funds deposited with Bank
be ascertainable, LTCwill maintain the necessary records; and
WHEREAS, Bank desires to obtain from LTC necessary data regarding each Custodial
Account Owner's interest in the Deposit Account; and
WHEREAS, LTC is willing to provide to Bank recordkeeping and certain other services
with respect to the Funds deposited in the Deposit Account; and
WHEREAS, Bank is willing to pay a sub accounting fee for the recordkeeping and other
services provided by LTC in connection with the Deposit Account; and
WHEREAS, Bank and LTC desire to establish the terms and conditions under which
LTC will provide account owner record keeping, subaccounting services and certain other
services to Bank in connection with the Deposit Account and the Custodial Accounts.
NOW, lHEREFORE, in consideration of the mutual promises herein contained, it is mutually
agreed as follows:
AGREEMENT
1. Deposit Account.
1.1 LTC shall establish and maintain during the term of this Agreement the Deposit
Account at Bank for the deposit offunds on behalf of Owners of Individual Retirement Accounts
for which LTC acts as Custodian. LTC shall detennine which Funds from the Owners are to be
deposited in the Deposit Account The aggregate balance in the Deposit Account maintained at
Bank shall in no event be less $110 million and in no event exceed $150 million. .
2. Subaccounting and Recordkeeping Services.
2.1 Bank's records shall expressly provide that the Deposit Account constitute trust fund
deposits made by LTC in its capacity as trustee or trustee for the benefit of account owners,
and that the records reflecting the separate interests of the account owners that compose
each Deposit Account are maintained by LTC.
2.2 LTC shall maintain separate accounting and record-keeping for each of its Custodial
Accounts which have balances in the Deposit Account. LTC shall be responsible for
providing such accounting and record-keeping services as agent for Bank. LTC
represents and warrants, covenants ·and agrees that (i) LTC and each of the Custodial
Accounts are, and at all times will continue to be, in compliance with the applicable
provisions. of 12 CFR Part 204.130 (Regulation D relating to Eligibility for NOW
Accounts) and 12 CFR Part 230 (Regulation DD, Truth in Savings Act) and (ii) LTC is
either (a) a directed trustee of a pension or other employee benefit plan, with respect to
Page 2 of9
1950
funds 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 performing 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 430(a) of the Intemal
Revenue Code of 1986; or (d) an agent or whose primary purpose is not the
placement of funds with depository institutions. LTC, on behalf of the Custodial Account
Owners, shall issue instructions to· Bank, by wire transfer, eheck or other appropriate means
acceptable to LTC and Bank, regarding transactions involving funds in the Deposit Account.
Bank shall be entitled to rely upon such instructions and Bank shall have no liability for any act
or omission hereunder while acting in good faith. Bank shall have no duty to act in regard to the
Deposit Account in the absence of sueb instructions. LTC shall maintain separate accounting .
and record keeping with respect to·the interest of each Owner in a Deposit Account and
shall be primarily responsible for prOviding such subaccounting and record keeping services
to Bank. LTC shall provide account holder and certain other services for the
Custodial Accounts and oWners as follows:
a. Deposits to the Deposit Account from all Custodial Accounts;
b. Withdrawals from the Deposit Account for aU Custodial Accounts;
c. Accounting services provided to all Custodial Accounts;
d. data processing services required for sub-account administration of the Deposit
Account; and
e. Periodic statements, notices and disclosUres in compliance with all applicable federal
and state laws and regulations .
. 2.3 Notwithstanding the services provided by LTC hereunder, it is lmderstood and agreed
that Bank shall be responsible at all times for maintaining and servicing the Deposit Account.
3. Fees and Invoicing.
3.1 Bank agrees to credit to the Deposit Account interest in an amOlmt equal to the
average collected balance in the Deposit Account (as determined in Section 3.2 below)
multiplied by the interest rate based on the annual "Interest Checking" rate as published
by at the following webpage: http://online.barrons.comlpubliclpagel9 0210-
nloneyrates.html (the "Rate',) Ifsuch Rate·is no longer published by Barron's, then the
parties shall mutually agree on a new Rate. The Bank. uses the daily-balance method to
calculate the Rate on the Deposit Account (the daily rate is 11365 of the Rate).
LTC agrees to provide this Rate to Bank no later than 5 days prior to the initial deposit
of funds in the Deposit Account and shall provide Bank notice· of any change in such
rate no later than 5 days prior to the effective date of such notice, which effective date
shall always be on the first day of a calendar quarter. Subject to the limitations set forth in
Secf,ion 4.5 beloW, Bank shall credit interest to the Deposit Account on the last calendar day of
each month. Bank and LTC agree to use best efforts to promptly resolve any discrepancy
between the records of Bank. and the records of LTC with respect to such interest at the end of
each month.
3.2 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
Page 3 of9
1951
· ~ e a . d balaooe of the Deposit AccotmI. It is und<lSfood und agreed 1hat sucll fees
being paid LTC pursuant to this Section 3 (the "Subaccounting Fees") are intended to
compensate LTC for its prior month's recordkeeping services in connection with the Deposit
Account. No other fees of any nature shall be due to LTC for services provided herein. Bank shall
pay LTC the Subaccounting Fees within ten (10) days after receipt of the monthly report referred
to in Section 3.3 below. LTC agrees to send and Bank agrees to process a daily net transaction,
via wired funds in or out, to reflect transactions on LTC's books that result in a net increase or net
decrease in the aggregate balance of the Deposit Account.
3.3 LTC shall furnish to Bank by the seventh (7th) day of each month a trial balance
which reflects the account number, name, type of account and account balance of existing
Custodial Accounts in· the Deposit Account as of the last business day of the preceding
month .. Such report shall be accompanied by a summary which is signed and certified as
true and accurate by the chief fmancial officer or President of LTC.
3.4 Each party agrees to promptly make its personnel available, as may be reasonably
. requested by the other party from time to time, to consult with the requesting party in
connection with the performance of its obligations pursuant to this Agreement at no cost to the
requesting party. Upon reasonable written notice to LTC, upon Bank's request, Bank shall
have the right to make a physical audit at any time of LTC's books and records relevant
to the matters covered by this Agreement to verify the accuracy of LTC's monthly report
of the number of Custodial Accounts within each Deposit Account and other matters
deemed relevant by.Bank. Bank shall not make more than four (4) such audits in each
calendar year.
4. Tenn and Termination.
4.1 Unless earlier terminated as provided below, the initial term of this Agreement will
commence on the Effective Date and continue for one (1) year from the Effective Date
(the "Initial Term"). The. Initial Term will be automatically renewed for successive
twelve (12) month periods (each a "Renewal Term"), unless and until either party
indicates in writing its intention not to renew the Agreement at least ninety (90) calendar
days prior to the end of the thenwcurrent term.
4.2 Either party may immediately terminate this Agreement upon a material breach by the
other party of any of such other party's obligations, including but not limited to LTC's
failure to maintain the minimum balance in the Deposit Account as provided above,
which breach has not been cured within thirty (30) calendar days after the breaching party
has received notice thereof.
4.3 LTC may terminate this Agreement upon thirty (30) days' written notice to Bank in
the event that Bank no longer meets the definition of "well-capitalized" pursuant· to 12
CFR § 565.4(b)(1)(ii). Bank agrees to promptly notify LTC in the event that Bank. ceases
to meet the defmition of wellwcapitalized as defined herein.
4.4 The parties may terminate this Agreement at any time for whatever reason(s) by
mutual written consent.
Page40f9
1952
4.5 Upon expiration or termination of this Agreement for any reason, any amounts owed
to L Te under this Agreement before such termination will be immediately due and
payable. Upon tennination for whatever reason, Bank agrees to cooperate with LTC in
the prompt and orderly transition of the Deposit Account to another bank of L TC's
choosing at no cost to LTC. Any interest accrued but unpaid with respect to any Deposit
Account will be credited to such account immediately prior to the transition of the
balances in such account to the successor institution. All rights and obligations of the
parties under this Agreement that, by their n a t ~ r e . do not terminate with the expiration or
termination of this Agreement shall survive the expiration or termination of this
Agreement..
5. Liability ..
5.1 In no event shall LTC be liable for loss of goodwill, or for special, indirect,
incidental, consequential, punitive, exemplary. or tort damages arising out of or relating
to this agreement, regardless of whether such claim arises in tort, contract, or otherwise.
Except for claims related to proprietary rights or payment obligations, neither party may
assert any claim against the other related to this agreement more than 2 years after such
claim accrued. LTC's aggregate liability to Bank and any third party for any and all
claims and obligations relating to this agreement shall be limited to the total fees paid hy
Bank to LTC in the six month period preceding the date the claim accrued.
6. Miscellaneous.
6.1 Upon reasonable request in writing no more frequently than once every 12 months.
L Te shall have the right, but not the obligation, to review the books and records of Banlc
relevant to the matters set forth in this Agreement
6.2 The parties shall indemnify and hold harmless each other from and against any and all
claims, losses, liabilities, or damages (including reasonable attorney's fees and other
related expenses) arising from or in connection with this Agreement to the extent that the
claim, loss, liability or damage is directly related to the indemnifying party's willful
wrongdoing, gross negligence. or material breach of its duties under this Agreement.
Notwithstanding the foregoing. LTC shall indemnify and hold hannless Bank and its agents,
affiliates and employees from all suits, actions, costs. expenses (including reasonable attomeys'
fees). judgments or claims of any character, type or description brough.t, incurred or made ("Bank.
Costs"). arising from or relating to: (A) the gross negligence or willful misconduct of LTC, as
agent for Bank, in the execution of or perfonnance of this Agreement; and (B) any claim or
assertion by any customer of LTC, including but not limited to a Custodial Account Owner.
relating to any Custodial Account or any service provided by LTC to any customer, including but
not limited to a Custodial Account Owner, provided that the foregoing indemnification in this
subparagraph (B) shall not apply to the extent the Bank Costs result directly fi'om the gross
negligence or willful misconduct of Bank.
6.3 Each party will procure and maintain at all times during the term of this Agreement
and for a period of at least two years following any. termination of this Agreement, at its
own expense, comprehensive insurance policies to insure against errors, omissions or
Page 5 of9
1953
misfeasance in the performance of such party's obligations Under this Agreement, with
Coverage that is reasonable and custOtnaIY in light of such party's business, as well as
such party's duties and obligatio:D.s set forth in this Agreement. . .
6.4 The parties agree that with the exception of claims regarding confidentiality or
proprietary rights, upon the written demand of either party. whether made before or after
the institution of any legal proceedings, but prior to the rendering of any judgment in that
proceeding, all disputes, claims and controversies between them, .whether individual,
joint, or class in nature, arising from this Agreement or otherwise. including without
limitation contract disputes and tort claims, shall be resolved by binding ,arbitration
pursuant to the· Commercial Rules of the American Arbitration Association. Any
arbitration proceeding held pursuant to this arbitration provision shall be conducted in .
Denver, Colorado, or at any other place selected by mutual agreement of the parties. The
statute of limitations, estoppel, waiver, laches and similar doctrines which would
otherwise be applicable' in an action brought by a party shall be applicable in any
arbitration proceeding, and the commencement of an arbitration proceeding shall be
deemed the commencement of any action for these purposes. The Federal Arbitration
Act (Title 9 of the United States Code) shall apply to the construction, interpretation, and
enforcement of this arbitration provision.
6.5 This Agreement may be executed in two or more counterparts, which together will
constitute one and the same instrument, each of which will be deemed an original. The
parties authorize each other to detach and combine original signature pages and
consolidate them into a single identical original. Anyone of such completely executed
counterparts will be sufficient proof of this Agreement
6.6 This Agreement, including all schedules hereto, sets forth the entire understanding
and agreement of the parties with respect to the subject matter hereof. and supersedes any
and all oral or written agreements or understandings between the parties, as to the subject
matter of the Agreement
6.7 This Agreement) including any schedule hereto, may be amended only by a writing.
signed by both parties.
6.8 This Agreement will be governed and construed in· accordance with the laws of the
State of C o l o r a d o ~ and where applicable, Federal law, without giving effect to conflict of
. laws principles thereof.
6.9 Each party agrees to abide by all Federal and state laws and regulations applicable to
the performance of its obligations under this Agreement.
6.10 The relationship between the parties is that of independent contractors and no
agency, partnership, franchise, joint venture or employment relationship is intended or
created by this Agreement. Neither party will make any warranties or representations on
behalf of the other party.
Page 6 of9
1954
6.11 Mty notice under this Agreement will be in writing and delivered by personal
delivery, overnight courier, con:fumed facsimile, or certified or registered mail, return:
receipt requested, and will be deemed given upon personal delivery, one (1) business day
after deposit with an overnight courier, five (5) business days after deposit in the mail, or
upon confirmation of receipt of facsimile. Notices will be sent to a party at its address set
forth above or such other address as that party may specify in writing pursuant to this
Section.
6.12 If any provision herein is held to be invalid or unenforceable for any reason, the
remaining provisions will continue in full force without being impaired or invalidated in
any way. The parties may agree· in writing to replace any invalid provision with· a valid
provision that most· closely approximates the intent and economic effect of the invalid
provision. .
6.13 The waiver of a breach of any. provision of this Agreement. will not operate or be
interpreted as a waiver of any other or subsequent breach.
6.14 (a) Each party will keep confidential any information thatit receives from the other
party . (the receiving party being the "Recipient" and the other party being the
"Discloser,) relating to the organization. finances, business, transactions, or affairs of the
other party and its affiliates, including without limitation, trade secrets and proprietary
infonnation (including that of any client. supplier or licensor), client . lists, plans, all
information regarding the services provided hereunder, all software and systems, and any
other information and data received from or on behalf of.a party or its affiliates that the
Recipient could reasonably be expected to know is confidential (collectively.
"Confidential Information").
(b) "Confidential Information shall not include any information which (i) has properly
entered the public domain otherwise than through the fault of the other party in violation
of this Agreement, or (ii) Recipient already possesses without obligation of
confidentiality, develops independently without reference to Confidential Information of
the Discloser, or rightfully ~ i v e s witholit obligation of confidentiality from a third
party. . '
(c) Recipient agrees to hold as confidential aU Confidential Information it receives
from the Discloser. All Discloser Confidential Infonnation shall remain the property of
Discloser or its suppliers and licensors. Recipient will use the same care and discretion to
avoid disclosure of Discloser's Confidential Information as it uses with its own similar
information that it does not wish disclosed. but in no event less than a reasonable
standard of care and no less than is required by law. Recipient may only use Discloser's
Confidential Information for the lawful purposes contemplated by this Agreement.
Recipient specifically agrees that it will not use or disclose any ''non-public' personal
information" about customers in any manner prohibited by Title V of the Gramm-Leach-
Bliley Act ot the regulations issued thereunder ("OLBj, as applicable to Recipient.
Recipient may disclose Disclosers Confidential Information to: (i) its employees and
employees of permitted subcontractors and affiliates who have a need to know; (ii) its
Page 7 of9
1955
attorneys and accountants as necessary in the ordinary course of its business; and (iii) any
other party with Discloser's prior written consent Before disclosure to any of the above
parties, Recipient will have a written agreement with (or in the case of clause (ii) a
professional obligation of confidentiality from) such party sufficient to require that party
to treat Discloser's Confidential Information in accordance with the requirements of this
Agreement, and Recipient·wlll remain responsible for any breach of this Section by any
of the above parties. Recipient may disclose Discloser's Confidential Information to the
extent required by law or legal process, provided that (A) Recipient gives Discloser
prompt notice, if legally permissible, so that Discloser may seek a protective order, (B)
Recipient reasonably cooperates with Discloser (at Discloser's expense) in seeking such
protective order, and (C) all Discloser Confidentiallnformation shall remain subject to
the terms of this Agreement in the event of such disclosure. At Recipient's' option,
Discloser's Confidential Information will be returned to Discloser or destroyed (except as
may be contained in back-up files created in the ordinary course of business that are
recycled in the ordinary course of business over an approximate 30- to 90-day period or
such longer period as required by applicable law) at the termination or expiration of this
Agreement, upon Discloser'S request, Recipient will certify to Discloser in writing that it
has complied with the requirements of this sentence. Recipient acknowledges that any
breach of this Section may cause irreparable hann to Discloser for which monetary
. damages alone may be insufficient, and Recipient therefore acknowledges that Discloser
shall have the right to seek injunctive or other equitable relief against such breach or
threatened breach, in addition to all other ~ e d i e s available to it at law or otherwise. .
6.15 This Agreement may only be assigned upon the written permission of the non-
assigning party; provided, however, that LTC may assign this agreement to an affiliate or
to a purchaser of all or substantially all of the assets of LTC upon the giving of Written
notice of such assignment to Bank.
6.16 LTC and Bank understand and agree that the services provided by each other under
this Agreement are not exclusive and that, subject to the confidentiality provisions above,
either party may enter into agreements with others for the provision of similar services.
6.17 With the exception of Bank's payment obligations, neither party shall be responsible
for delays or failures in performance resulting from acts of God, acts of civil or military
authority, fire, flood, strikes, war, epidemics, pandemics, shortage of power, or other acts
or causes reasonably beyond the contro! of that party. The party experiencing the force
majeure event agrees to give the other Pm1Y notice promptly following the occurrence of
such event, and to use diligent efforts to re-commence performance as promptly as
commercially practicable.
6.18 The prevailing party in any arbitration, suit, or action brought against the other
party to enforce the terms of this Agreement or any rights or·oblig8.tions hereunder, shall
be entitled to receive its reasonable costs, expenses, and attorneys' fees of bringing such
arbitration, suit, or action. . .
IN WITNESS WHEREOF, the p ~ e s hereto have caused this Agreement to be executed
Page 8 of9
1956
by their respective officers thereto duly authorized as of the day and year fJISt above written.
LINCOLN TRUST COMPANY (LTC)
By

Name
Title
Cfl....i:J I. (1fAt>- .-
C·GcJ

UNITED WESTERN BANK
By
-z:-:t:::r=" .
Name
Title
·r K·
C-O()
leA...JT'-
Page90f9
1957
TabC
Exhibit 73 B
1958
-_ ....... _. -"-'
..... __ .- .. - ..... - ... -..... ~ .. -..... -.-... ,_ ... _- - . -'''-''.- .- - . - - '-' - --. - - .--_., ._-
FIRST AMENDMENT TO SUBACCOUNTlNG AG:R'EEMENT
TInS FIRST AMENDMENT TO SUBACCOUNTING AGREEMENT (this
"Amendment
1i
) is made and entered into as of this Sth day of October. 2010 (the "Effective
Date"). by and between, LINCOLN TRUST COMPANY, a Colorado industrial bank with 1rust
poweD ("LTC,,) and UNITED WESTERN BANK®, a fede.raI. savings bank ("SfDlkD) (LTC and
Bank referred to herein each as a "Party" and collectively the "Parties").
Wl1'NBSSEm
WHEREAS, LTC and. Bank are parties to that certain SUBACCOUNTING
AGREEMENT dated February I, 2010 (the "Agreementj, whereby, LTC provides certain
services, including suba.coounting and recordk:eeping services, to Bank with. respect to Funds
maintained in the Deposit Account at Bank for the benefit of Owners of Custodial Accounts; and .
WHEREAS, the Parties desire to amend the Agreement as described herein.
NOW, THEREFORE, for other good and valuable considemtion, the receipt and
sufficiency ofwbich are heIeby acknowledged, the Parties hereby agree 10 amend the Agreement
in the following respects to wit:
1. The:first paragraph in Section 3.1 (fees and Inyoicing) of the A8fC('ment shall be deteted in
its entire1yand replaced with the following paragraph:
3.1 Bank agrees to credit to the Deposit Account interest in an. amount equal to
the average collected balance in the Deposit Account (as detennined in Section
3.2 below) 'multiplied by the interest rate based on the annual "Interest Checking"
rate as published by Barronts at the following webpage:
http://online.barrons.comlpubIiclpa.gel9 0210-moneyrates.html (the "Rate"). The
current effective Rate shall be calculated using the arithmetic avemge of the
available weekly interest rates of the preceding calendar quarter, allowing for the
, notice period as provided immediately below. If such Rate is no longer published
by Banon'St then ~ parties ~ mutually agree on a new Rate. The Bank uses
the daily-balance method to calculate the Rate on the Deposit &count (the daily
rate is 1/365 of the Rate). .
The Parties agree that aU other terms or conditions of the Agreement shall remain in
, full :force and effect and the Parties reafJ:irm the Same. This Amendmen:l;, together with. the
Agreement, represents the complete understanding between the Parties.
Capitalized ten:ns used and not defined in 1b.is Amendment. shall have themeanmgs
ascribed to them in the Agreement.
This Amendment shall be binding upon and inure to the benefit of and be enforceable by
the Parties hereto and their· respective successors, assigns (including any direct or indirect
successor by merger or consolidation) and ad:ministtators.
1
1959
............. , .....
IN WITNESS WHBRBOF, the Parties hereto have entered into this Amendment as of the
date first written above.
LINCOLN TRUST COMPANY
By:
Name: Robert H. Beriault
Title: President
UNITED WESTERN BANK
.
Title:. .
..
2
1960
TabC
Exhibit 73 C
1961
SECOND AMENDMENT
This amendment is dated December 6, 2010 (the "Amendmentj and is between Lincoln
Trust Company (the ''Nominee'' and United western Bank, Denver, Coloradd (the "Bankj;
WHEREAS, Nominee and Bank are parties to that certain Subaccounting Agreement
made as of February 1,2010 (the "Agreementj whereby Nominee, on behalf of the Nominee's
clients and at the direction of the Nominee's clients, directs funds at the Bank for the primary
purpose of facilitating customers' purchase and sale of securities and other investments and not
in a capacity of a deposit placement service; .
WHEREAS, the Nominee and Bank seek: to amend the Agreement effective immediately
in order to re-structure the Agreement to mirror the relationship set forth in FDIC Advisory
Opinion 05-02, dated Febmary 3, 2005;
WHEREAS, the Nominee and BaDk: acknowledge that time is of the essence;
NOW THEREFORE, in consideration of the mutual promises herein contained, Nominee
and Bank agree to be legally bound by the termS of this Addendum:
1. Effect of this Addendum
The terms of this Addendum shall be deemed to supersede any and all
inconsistent terms of the Agreement All other terms of the Agreement which are not
inconsistent with this Addendum shall remain in full force and affect notwithstanding anything
to the contrary herein.
2. Amount of Swept Deposits at the Bank
(a)
(b)
Nominee shall use its commercially reasonable efforts to ensure that all funds
deposited at the Bank ("Swept Funds") do not .exceed 10% of the total client
account assets held in client accounts at the Nominee (the "Ratio''). For purposes
of clarity. Nominee shall use commercially reasonable efforts to prevent the
average daily balance of Swept Funds during anyone month from exceeding the
Ratio, based on the average total client account balances held by the Nominee
during that month (the "Monthly Ratio''), based on the most recently available
data.
At no time shall any Swept Funds be held in time deposits.
3. Reporting
(a) Nominee. through its Chief Executive Officer or Chief Financial Officer shall
provide Bank with a written certification no 'later than the fifteenth (15th) day of
each calendar month confinnjng both. the Ratio and the Monthly Ratio for the
proceeding calendar month as w e l ~ · a s the average number of client sub-accounts
for the proceeding calendar month represented in any omnibus account or
1962
.,
4. Fees
(a)
accounts maintained at the Bank for the benefit of the Nominee's clients. For the
purposes of such certification oftbe average number.of client sub-aecounts for
. any calendar months shall be the number of client sub-accounts held by the
nominee as of the first and last day of each calendar month divided by a factor of
two (the "Average Accounts"); provided. however. that the Nominee shall never
permit more than average of 30,000 client sub-accoUnts to be maintained for its
clients at the Bank in any calendar month. Each monthly certification shall
acknowledge that the certification will by the Bank for purposes of
reporting to the Federal Deposit Insurance Corporation and may be relied upon by
federal bank during examinations of the Bank.
·In lieu of any other sub-accounting or similar fees due to the Nominee under the
terms of the Agreement, the Bank shall pay Nominee a: fee for administrative and
other serviceS rendered as are provided for in the Agreement as set forth on
Schedule A hereto (the Fee"), which is an amount set forth on
a per account or per customer and is not calculated on the basis of funds
placed at the Bank. Schedule A is incorporated herein and made a part hereof for
a:n purposes by this reference.
S. Impact to the Agreement
(a)
For purposes of clarity, pending the execution of any renegotiated Agreement. all
terms of the then-current Agreement not inconsistent with Sections 2 through 4 of
this Addendum shall remain in full force and effect.
6. Miscellaneous
(a)
(b)
This Amendment may be amended or modified only in writing signed by a:n the
parties hereto. This AmendIIlent shall be construed and govemed by the laws of
the State of Colorado. This Amendment sets forth the entire agreement and
muierstanding of the parties with respect to the subject matter hereof. This
Amendment shall be binding upon and inure to the benefit of the parties hereto
and their successors and assigns, notwithstanding the foregoing, this Amendment
may not be assigned.
This Amendment may be executed in one or more counterparts and by facsimile
signature. each of which shall constitute an original and a:n which shall constitute
one instrument, in each case, for all purposes including admission .into evidence
of the agreement of the parties.
(c) The descriptive headings of the sections of this Amendment are for convenience
. only and do not conStitute part of this Amendment.
1963
Schedule A
This is Schedule A to the Amendment made as of November 30. 2010 to the
SubaccoWlting Agreement by and between Lincoln Trust Company and United Western Bank
made as of February 1. 2010.
Section 1. All capitalized terms not otherwise defined in this Schedule A shall
have meaning attributed to them in the Amendment.
Section 2. The monthly Fee to be paid by the Bank. to the
Nominee shall be equal to $3.00 per each of the Average Accounts in each calendar month. The
aggregate Fee due to the Nominee from the Bank with respect to any calendar
month shall be the amount determined by multiplying the number of Average Accounts times
$3.00 (the "Aggregate Fee").
Section 3. The Aggregate Fee shall be paid by the Bank to the
Nominee in the month succeeding the calendar month for which the Aggregate Sub--Accounting
Fee is determined within five days of the delivery of the certification of the Average Accounts
for the calendar month in question by the Nominee to the Bank. '
1964
IN WITNESS WHEREOF, with the intention to be bound by the terms of this
Addendum, the parties have executed this Addendwn as of the day and year first above written
by causing their respective authorized representatives to sign where indicated below.
LrNCOLN TRUST COMPANY
By: I f ) ~ A- 4 ~
Title: .rr· V;O
1965
TabC
Exhibit 74
1966
AMENDMENT TO THE TmRD ADDENDUM AND RESTATED
ADMINISTRATIVE SERVICES AGREEMENT
THIS AMENDMENT TO THE THIRD AMENDED AND RESTATED
ADMINISTRATIVE SERVICES AGREEMENT (this "Agreement") is made and
entered into as of February 11.2010 ("Effective Date"), by and among United Western
Bank, fonnerly know as Matrix Capital Bank, a federal savings bank (the "Bank"),
Matrix Settlement and Clearance Services, LLC, a New York limited liability company
("MSCS"), and Matrix Financial Solutions, Inc. flea MG Colorado Holdings, Inc., a
Delaware corporation ("Matrix") (each a .. and collectively, the "Parties").
WITNESSEm
WHEREAS, the Parties have entered into that certain Agreement, dated as of July 5,
2007;
WHEREAS, capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to them in the Agreement; and
WHEREAS, the Parties desire to amend the Agreement as described herein.
NOW, THEREFORE, in consideration of the preambles and the agreements contained
herein, and for other good and valuable consideration, the receipt and adequacy of which is
. hereby acknowledged, the Parties hereto agrees as follows:
1. Tennination. The Parties agree to amend and replace Section 5 (b) (viii) with
the following amended section:
(viii). By MSCS, immediately, in the event the Bank is subject to a cease and desist order
issued by the Bank's regulator that includes an allegation of unsafe and unsound practices other
than those pertaining to any matter included in the Memorandum of Understanding entered into
by and between the Bank and the Office of Thrift Supervision on December 10, 2009.
2. Miscellaneous. Except as specifically modified hereby, the Agreement
shall remain in full force and effect.
IN WITNESS WHEREOF, this has been executed in multiple counterparts
on the date first set forth above, each of which shall, for all purposes, be deemed an original and
all of which shall evidence but one agreement between the parties hereto.
1967
UNITED WESlERN BANK.
A federally chartered savings
Title: fAa
MATRIX FINANCIAL SOLUTIONS, INC.
a Delaware corporation
By:
Name:
Title:
Qi /I.

MATRIX SETTLEMENT & CLEARANCE
SERVICES, LLC
a New York limited Ii 1'· company
By:
Name:
J9L- R-Jtt.4'L/
,. 7
Title:

1968
TabC
Exhibit 74 A
1969
THIRD AMENDED AND REsTATED ADMlNISTMTIVE SERVICES AGREEMENT
MADE AS OF
JULY 5, 2007
This THIRD AMENDED AND RESTATED ADMINISTRATIVE SERVICES AGREEMENT
(this "Agreement") is made and into as of July 5, 2007 (the "Effective Date"), by and among
United Western Bank, formerly know as Matrix Capital Bank. a federal savings bank (the "Bank"), Matrix
Settlement and Clearance Services, L.L.C., a New York limited liability company ("MSCS"), and MO
Colorado Holdings. Inc., a Delaware corporation ("MG Colorado Holdings") (each a "!!mn" and
collectively, the "Parties").
WITNESSETH
WHEREAS, MSCS. either directly or through its affiliates and subsidiary, performs certain
business activities that consist primarily of facilitating the clearing of purcbase and redemption trades of
various mutual fund shares (such clearing ofpurcbase and redemption trades of various mutua1 funds being
referred to herein as the "Trading Services") for the customer accounts of financial institutions. such as
thil'd.party record keepers. banks, and registered investment advisors (the "Customers"); and
WHEREAS, in the course of performing the Trading Services for the Customers, the Customers
may transfer funds to certain accounts at the Bank for deposit or for the purpose of settlement of trades (the
"Accounts"); and
WHEREAS, the funds being transferred are generally qualified employee benefit plan participant
funds held in a fiduciary capacity by a custodian or other third parties; and
WHEREAS. the Customers require certain administrative services from MSCS, including but not
limited to, the automated transmission of data, the creation of data interfilces. the automation of funds
movement from the CUstomers' primary financial institution to the Bank, and the ongoing maintenance and
support required for such services provided to facilitate the transfer of funds into and out of the Accounts
(together referreQ to herein as .. Mministrative and
WHEREAS, the Bank desires to provide Administrative Services· to the Customers to facilitate
and receive the benefit of the deposit relationship(s) resulting there from; and
WHEREAS, Bank could provide Administrative Services itself or obtain such services from a
third party; and
1970
•• If.
THIRD AMBNDBD AND RaC;TATIm ADMlNISTRATlVBSBRVlceB AGRBliMENT
MADS ASOP JULY S. 2007
PAOB2of14
WHBRBAS. MSCS has the expertise, staff. and third party relatioDSbips to provide the required
Administrative Services on behalf of the Bank; and
WHBREAS. upon and snbject to the terms hereof. MSCSand Bank desire Bank to act as "Sett1ins
Bank OJ;1ly Member" in CODDection with the Trading Services in accordance with the rules or the National .
Securities Clearing Corporation (the ~ ' ) . dated as ofDeccmber 13.2006 (as amended from time to
time the "NSCC Rules'· - which such R.ulea can be found in their curront form at
http://www.D8CC.comllegallnsccru.pdt); and
WHBRBAS. MSCS and Bank have heretofore entered into an AMBNDBD AND RESTATED
ADMINISTRATIVE SBR.VlCBS AGRBBMBNT. effective as of December 1. 2004, to provide for the
provision of the Administrative Services by MSCS on behalf of the Bank to the Customers (as amended to
date. the "Ameude!lAdpdnil!tratiye Seryices Agreement"); and
WHERBAS. the Parties hereto wish to amend and restate such Amended Adminis1rative Services
Agreement. efCective as of the Bffective Date, by entering into this Agreement; and
WHBR.BAS. the Parties hseto, and otheIs. entered into a Contribution Agreement, effective as of
December 1, 2004 (the "Contn'bution AgrmmHmf'). which, among other things. provides for the
reoxganization of various bu$iness enteIprises. a copy of which is attached hereto for refercnco purposes;
and
WHBREAS. commencing on the Motive Date, the Parties hereto intend that the A ~
Services will continue to be proVided by MSCS; and
WHBRBAS. the Parties intend that MSCS will continue. to receive fees for such Administrative
Services.
NOW, THER.BFORB, in consideration of the reeitala above, the mutual premises set tbrth herein
and other good and valuable CODSideration, the receipt and legal sufficiency of which is hereby
acknowledged. the particsbereby agree as follows:
1. Defined Ttm!!§, All capitalized terms not defined herein sball have the meaning ascribed to them in
the Contribution Agmement.
2
1971
THmo AMP.NPF.O ANO Rr,,'ITATRO AnMlNrSTRA TIV6SERVrCE.<; AGREEMENT
MADE AS OF JULY 5,2007
PAOE30f14
2. Amended Administratiye Services Agreement Void. The Amended Administrative Services
Agreement is hereby superseded and restated by this Agreement.
3. Provision of Settlement Bank Seryices. The NSCC Rules, including without limitation the.
''Procedures'' (as defined in the NSCC Rules) promulgated under Rule 33 of the NSCC Rules, are
incorporated herein by reference. During the term of this Agreement, pursuant and subject to and in
accordance with Rules 54 and 55 of the NSCC Rules, including the Procedures promulgated by the
NSCC pursuant to Rule 33 of the NSCC Rules that relate to actions or inactions of a "Settling Bank"
under Rules 54 and 55 of the NSCC Rules, Bank hereby agrees to act as a "Settling Bank Only
Member" in connection with the Trading Services provided to Customers by MSCS; provided, that
nothing herein shall be construed to obligate the Bank to provide· any overdraft or loan to MSCS, MG
Colorado Holdings, any Customer or any Affiliate of any of the foregoing (the "MSCS Related
Entities"). Without limiting the generality of the foregoing, MSCSand MG Colorado Holdings hereby;
(A) acknowledge the refusal rights of the Bank under Section 3 of Rule SS of the NSCC Rules and
Procedure VUl,D of the Procedures promulgated under Rule 33 of the NSCC Rules; (B) agree that the
Bank shall have no liability to any MSCS Related Bntities in the event that the Bank refuses to settle
one or more trades with NSCC on any given day or days as a result of a net-debit position for any
MSCS Related Entity on such day or days, and (C) jointly and severally, covenant and agree to
immediately upon demand from Bank. indemnify, defend and hold harmless the Bank and its officers,
directors, parents, subsidiaries and employees. from and against any.and all liabilities. costs, expenses
(including reasonable attomeys' fees), fiDes and penalties arising from or relating to! (i) a refusal of
the Bank to settle with NSCC any trades on any given day or days as a result of a position of
any MSCS Related Bntity on such day or days; or (ii) despite the existence of any such net-debit
. position of any such MSCS Related Bntity, the settlement by the Bank of trades with NSCC on any
given day or days. Bank shall indemnify and hold hannless MSCS, MG Colorado Holdings, and their
respective subsidiaries, affiliates, managers, officers, directors and employees from all liabilities, costs
and expenses (including reasonable attorneys' fees), fmes and penalties arising from or relating to:
errors, mistakes or inaccuracies in the settlement of NSCC trades by Bank • as a settling bank, in
connection with the Services to Customers by MSCS (except that Bank shall have no
indemnification obligations under this Section 3 to the extent any such errors. mistakes or inaccuracies
are attributed to the actions or inactions of MSCS. The provisions in this Section 3 relating to the
indemnification obligations of the parties shall survive the termination oftbis Agreement.
4. Provision of Administrative Services.
(a) MSCS will provide the Administrative Services requested by the Customers who agree to
transfer funds into and out of the Bank.
3
1972
'. "
THIRD AMBl'IDBD AND RBSTATBD ADMlNISTRA'TM! SBRVlCBS AORBBMBNT
MADS AS OF JULY S. 2007
PAGB40f14
(b) During the term of this Agreement. MSCS wilt cause and agree tbat the aggregate
deposits in the Accounts shall have a minimum average monthly balanco ofSlOO.OOO.OOO (the "Minimum.
Deposit Level',.
(e) MBCS shall be tespoDSible for determining the Daturo and extent of the Administrative
Senrices based on the instructions frout. the CuStomers and &ball be respoDSible for the decision to provide
such Administrative SerVices. MSCS shall be solely responsible for aU coats iocumd in providiDg the
Administrative Services, inc:luding. but not limited to. third party vendor costs, intema1 statling
requirements, and other costs, fees and expenses incurred in connection with ongoing maintemmce and
support for the Customors. Notwithstanding the foregoing. MSCS agrees to consult, wi1h the Bank :in each
case where the tinnishiDg of Administrative Services to a Customer tequires the pa:di.cipation of the Bank.
, (d) The Baak and MSC$ acknowledge that the primaty benefit to the Balik of MSCS
iUrnisbing Administrative Services to Customers is the dePosit relationship resulting &om the transfer of
f\mds into and out of the Accounts. As sucb. the Bank desires to limit the fees paid to MSCS pursuant to
this Agreement to an amount based upon the actual deposits generated by MSCS fumishing Administrative
Services to those Customers who have chosen to deposit Ih8ir tbnds with ~ Bank. Por each Customer
whioh deposits funds into an Acoount, except for the Special Account for the Exclusive Benefit o f ~
Customers of MSCS Financial Services, L.L.C (Account No. 0138042817) [and except for the escrow
account ofMG Trust u.c for the benefit of the State of Colomdo (Account No. 27-820001303)1. the Bank
win pay MBCS the fees set forth in &bibit A hereto as consideta1ion. of MSCS timely and adequately
fbrnishing the AdmiDistrative Services requiIed by the Customer. The fees set forth in Exhibit A hereto will
be paid on a moDtbly basis and may be amended or modified only by written agreement of the Parties
bereto from time to time.
(e) MBCS will request ftom or provide to the Bank. by the third (3"') business day of any
1l1OIlth. a detailed record of all deposits held at the Bank as a reiuIt of Administrative Services provided by
MSCS for the preceding calendar month. Such report shall be in a Conn and format that aUows MSCS to
d ~ the avexage daily bil1ance and the average monthly balance of tile deposits in the Accounts for
the preceding ca1eodar month (the aggregate of such average dally balances in the ACCOWlts for a calendar
month in question being refened to herein as the "Average Daily Balance" for such calendar month in
question). The Bank shall further provide such other records of deposits or Account activity as reasonably
requited and nmtuaUyagreed upon to facjJitate the calculation of the fees due MSCS pursuant to Exhibit A.
hereto or the calculation of tile average monthly balances of tile Accounts as set forth in Section 4(b).
4
1973
", '.
THIRD AMENDED AND RESTATBD ADMlNISTRATIVa SBRVlCBS AORBBMEiNT
MADBAS OF JULY 5, 2007
PAGBS of14
(f) MSCS will provide the BaDIe :with a detailed invoice retlec;ting the Average Daily
Balances :for each month as well as MSCS's calculation of tho fees provided for in Exhibit A herein by the
tJUrd (3"') business day olthe calendar month. Fees invoiced sha1I be due three (3) business days following
receipt by the Bank of the invoice. It is undorstood and agreed that such fee is intended to compensate
MSCS for its fbmishing Administrative Services to CUstomers. No other tees of any nature shall be due to
MSCS from Bank for Adinmistrative Services provided hereunder. MSCS s1Ja1l also provide sucb other
reports and documents to the Balik. as maybe reasonably necessuy in order for the Bank to verify 01' audit
any infoImation in connection with the Administration Services. To the extent reasonably practicable, such
reports and ctocuments shall be in substantially the same form as have heretofote been provided by MSCS
to the Bank.
(g) Bank personnel will be made available, as may be reasonably requested. to consult with
MSCS in coordinating its opeJationS and the provision of Administrative Services pursuant to this
Agreement.
S. Imo-
(a) The tenn of this Agreement commenced on ,July S, 2007 and sball. UDless earlier
temDnated pursuant to this Section 5, continue unti11uly S, 2010 (the "lpitial Teon"). At the imd of the
Initial TCDJI, this Agreement shall automatically renew for two successive ono-year tenDs (each a
"Renewal Term") UDless MSCS notifies the Bank in writing at least 90 days before the expiration of the
Initial Term 01' a Renewal Term. of its intent to solicit bids from other (the ''Bid Notice"). In
the eVent a Bid Notice is timely delivered to the Bank, then MSCS aha1l have 45 days after delivery of such
Bid Notice (the "Bid Period' in which to solicit bona fide otleD from independent financial institutions of .
the terms upon which such financial institutions desire to provide the Administrative Services (the ''Bgg
Fide Bids". Prior to the end of the Bid Period. MSCS shall notify the Bank either that (i) it has received DO
Bona Fide Bids. in which case the Renewal Term in question shall automatically renew or (if) it has
received one 01' more Bona Fide Bids, and the contents of the one Bona Fide Bid that it desires to accept
(the "pesired Bid''). The Bank shall have 30 days after receipt of the contents of the Desired Bid in which .
to either (x) match the Desired Bid. in which case the Parties hereto shall mutually negotiate and execute
definitive agreements reflecting the same within 15 days, 01' (y) notify MSCS that it will not match the
Desired Bid, in which case this Agreement shall terminate as of the end of the Initial Term or the Renewal
Tenn in question.as the case may be. The faiJme of the Bank to notifY MSCS that it will match the Desired
Bid as set forth in (x) above shall be deemed to be a notice that it shan not match the DesimI Bid. Inthe
event the Parties shall fail to execute definitive agreements within the time period prescribed in c1ause (x)
above and provided that such failure shall not be due to the fault ofMSCS, then MSCS shall the right
5
1974

" *.
mRD AMBNDED AND lU!STATED ADMINISTRATIVE SERVICES AGRBBMENT
MADE AS OF JULY 5, 2007
PAGE60fl4
to accept the Desired Bid and enter into definitive agreements with the third-party depository set forth in
the Desired Bid.
(b) This Agreement shan also be subject to termination at a date earlier than that provided
in subsection 5 (a) above as fonows:
i. By MSCS, if at any time tbe Bank: is not "adequately capitalized" within the
meaning of12 CFR 565.4, as amended from time to time;
ii. By MSCS, if at any time the Bank ceases to qualify as a ·'Settling Bank: Only
Member" within the NSCC Rules;
iii. (A) by MSCS, upon the occurrence of a Change in Control (as defined below) of
the Bank or (B) by the Bank upon a Change in Control (as defined below) of
MSCS;
iv. By the Bank, upon the occurrence ofa Regulatory Objection (as defined below);
v. (A) by the Bank, upon the material breach by MSCS or'MG Colorado Holdings
of this Agreement or (B) by MSCS, upon the material breach by the Bank of this
Agreement;
vi. By the Bank, if Customers fail to at anytime maintain the Minimum Deposit
Level Notwithstanding anything to the contrary contained in this Agreement, in
the event that the Minimum Deposit Level is not maintained with Bank and
Bank provides written notice to MSCS regarding such breach, MSCS shall have
9Q days from the date of the breach to cure such breach and in the event MSCS
fails to cure such breach within 90 days of the breach, then Bank may
:immediately terminate this Agreement;
vii. By either the Bank or MSCS, in the event the Bank's continued performance of
services under this Agreement win result in or is likely to result in a violation of
any federal, state, local or regulatory rules or regulations applicable to the Bank
or United Western Bancorp. Inc andlor the Bank's inability to provide such
services, including, but not limited to, the Bank's inability to baOdle increases in
trading volume, in all material respects in accordance with the current existing
6
1975
. to. I.
THIRD AMENDBD AND RBSTATBD ADMINIST'RATJVB SBllVICBS AOREBMENT
MADB AS OF JULy S, 2007
PAos7of14
service standards. The Bank shaD provide prompt written notice to MSCS in the
event that the Bank shall determine, in its reasonable judgmerit, tbat its
continued perfonnance of services under this Agreement will result in or is
Jikely to result in a violation of any appUcable f e ~ state, local or regulatory
rules or regulations by the Bauk: or United Westem BaucoIp. Inc. ad/or its
joability to provide such services in an· material respects in accordance with the
current existing service standards. In the event a Party elects to tenniDate this
Agreement pursuant to this Section S(b)(vii), the Bank sbaU cooperate with
MSCS to effectuate an orderly tranaition;
viii. By MSCS. immediately. in the event the Bank is subject toa cease and desist
order issued by the Bank's regulator for unsafe and unsound banlciog pxacticu;
ix. By MSCS, immediately following the maturity date of the Bank's S 1 0 million
tine of ~ to MG Trust Company, LLC (and guaranteed by MG Colomdo
Holdings) (the "Une of Credit"). such Line of Credit provided to MG Colomdo
. .
Holdings for Uquidity purposes, and in the event the Bank refuses to renew the
Line of Credit on terms that are subitautiaUy·similar to the terms existing on the
Line of Credit cuncntly existing as of the date oftbis AgteemeIlt; or
x. By MSCS without notice in the event that Bank's OTS charter is revoked.
(c) A Party wishing to terminate this Agreement punuant to Sections 5(&)(1) tbrough (v). or
S(b)('Vii)must provide the other Party with written notice that the initiating Party is terminating this
Agreement sixty (GO) days foUowing receipt of such notice (a ''Termination Notice"). A termination of this
Agreement pursuant to the provisions of Section S(b)(i) ...(v), or 5(b)(vii) shall be effective on the 61ft day
:following the delivery of a Termination Notice ua1ess the breaching party cures aU breaches delaiJed in the
applicable TermiDation Notice wi1hin the sixty (60) day notice period following receipt oithe Termination
Notice; provided. however, that: (i)a termination by MSCS or the Bank due to a Change in Control of
Bank or MSCS, as' the case may be, shall be effective immediately if the party acquiring such Party isa
business competitor of the other Party; or (ii) if an earlier terJDjnation is teqUi:red by law.
(d) The tenn "Change jn Control" ofMSCS sbaIl mean any transaction (which shaU include
a series of related transactions or a transaction occurring PUISUallt to a pJan) tbat bas the result that the
members ofMSCS or stockholders ofMO Colorado Holdings, as oftha Effective Date, cease to. ditecdyor
indirectly, own (individually or collectively) more than fifty percent (50%) of: (x.) the membership
7
1976
'.
THIRD AMliNDED AND RESTATED ADMINISTRATlVB SBRVICES AGREEMENT
MADB AS OF JULY 5,.2007
PAGE8of14
interests ofMSCS or capital stock ofMG Colorado Holdings, as the case may be); or (y) any entity that
results from the participation of MSCS or MG Colorado Holdings in a consolidation. merger or other
similar form of cotpOrate transaction.
(e) The tenn "Change in Con1tol" of the Bank shall mean: (A) the unqualified approval by
the Office of Thrift Supervision ("OTS") of a Holding Company Application with the Office of Thrift
Supervision by a person or group of persons s e e ~ g to acquite mote than fifty percent (500,4) of the
outstanding common stock of United Western Bancorp, Inc. or the Bank; or (B) the unqualified approval
by the OTS of a Notice or Application of Change in Control with the 01'8 by a person or group of persons
seeking to acquire more than fifty percent (50%) of the outstanding common stock of United Western
. Bancorp,lnC. or the Bank.
(f) The term "Regulatory Objection" shall mean any order, directive, or demand by Bank's
primary federal regulatory body that prohibits, objects to or otherwise restricts any. of the terms or
provisions of this Agreement.
6. Miscellaneous.
(a) . Without limiting the provisions of Section 3 above and in addition to the indemnification
provisions contained therein, (i) Bank shall indemnify and hold hannless MG Colorado Holdings, MSCS
and their respective subsidiaries, affiliates. agents, officers, managers and employees from aU suits, losses.
damages, reasonable,attorneys' fees, legal expenses, actions or claims of any cbaracter. type,or description
brought or made for or on account ot; or occasioned by the acts of gross negligence" or willful misconduct
of Bank or its agents or employees in the execution of or perfonnance of this Agreement. and (li) MG
Colorado Holdings and MSCS. shall indemnify and hold harmless Bank and its subsidiaries, affiliates,
officers, directors, agents and employees from all suits, losses, damages, reasonable attomeys' fees, legal
expenses, actions Of claims of any character, type, or description brought or made for or on account of, or
occasioned by the acts of gross negligence or willful misconduct ofMG Colomdo Holdings, MSCS or their
respective agents or employees in the execution of or performance of this Agreement. The provisions of
this Section 6 (a) shall survive the termination oftbis Agreement.
(b) This Agreement contains the. entire agreement amongst the Parties hereto relating to the
subject matter hereof. There are no unwritten agreements between the Parties hereto relating to the subject
matter hereo£ This Agreement may be amended or modified only by written agreement signed by each of
the parties hereto, except the Parties may agree by eleQtronic mail that Bxhibit B as agreed to by the Parties
may be replaced as necessary without a fonnalamendment.
8
1977
'.
THlRJ).AMENDBD AND RBSTATBDADMJNISTRATlVE SERVICES AOUBMBNT
MADs AS OF JULY 5, 20CYT
PAos90f14
(e) This Agreement shaD be govemed by and construed in accordance with the intemal Jaws oltbe
of New York, without giving effect to the choice of law principles
(d) Confidential Nature of Customer and Account Infonnation. MSCS acknowledges that the
Customer information and Account infonnation received by MSCS in connection with its perlbnnance
under the tmnsof this Agreement (coUectively. the "Customer JDibtmation',). are owned and controlled by .
the BaDk. To the extent applicable, MSCS agrees to the 1bUowing: (i) MScs sball not use aU or anypart of
the 0:Is10mer Intbrmation other tban as necessary to perform the services required of it hereunder; (ii)
MSCS agrees not to disclose any part of the Customer Information to any third party. other than third party
vendors who are involved in the Trading Services for Customers and to other third parties 88 required by
law or as allowed pursuant to this 'Agreement; (ib) MSCS turther a8reea that it may not disclose or use any
information regardiDg the Customer Information other than to cBIIY out the pmposes for which the
infomJation was disclosed under this Agreement Upon tcnnination of this Agreement, MSCS agrees
promptly to retum to the Bank all Customer Information provided to or received by MSCS; to m1tain from
disclosing any Customer Information to any third party. except as required or allowed by Jaw, and tab
all necessary s. to immediately its use of the Customer Iilformation. Notwithstanding the
foregoing. MSCS may re1ain any part of the Customer Jnfonnation UDder applicable record retention
iequirements; and MSCS may disclose the Customer Information to third party depositories in the event
MSCS is soliciting Bona Fide Bids pursuant to this Agreement MSCS sball require any such depositories
to execute a confid,ontiality agreement with terms similar to the tams contained intbis Agreement. To the
extent applicable. MSCS hereby agrees to with the Gramm-Leach-Bb1ey Act (the "GLB Act'? as in
effect from time to time, any successor statute, and any rules and regulations promulgated thereunder.
[Signature Page Follows]
9
1978
THIRD AMENDED AND RESTATED ADMINISTRATIVE SERVICES AGREEMENT
MADn AS OF JULY 5, 2007
PAGEIOof14
IN \\llTNESS WHBREOF. this Agreement bas been executed in multiple counteIParts on the date first set
forth above, each of which shan, for aU putposes, be deemed an original and aU of which shall evidence but
one agreement between the parties hereto.
UNITED WESTBRN BANK
A federally chartered savings bank
By:
£
A.Jd;L-
MG COLORADO HOlDlNGS, INC.
a Delaware corporation
By:
Name:

til . Name:
Title:
c;..j?lJ /C t:I,) Title:
MATRlX SETTLEMENT & CLEARANCE
SERVICES. LLC
By:
Name:
Title:
10
1979
EXBlBITA
To THIRD AMENDED AND REsTATED ADMINISTRATIVE SERVICES AGREEMENT MADE
AS OF JULY 5, 2007
EXHlBITA
With respect to the various types of Accounts that MSCS maintains at the Bank (other than the
three unitized accounts listed at the end of this ExMbU.4, which will be assessed a fee of thirty (30) basis
points of the Average Daily Balance (as defined in Section 3(e) of this Agreement», the Bank shall be
obligated to pay to MSCS under the Agreement a monthly fee consisting of an amount equal to the product
of the Average Daily Balance of any deposit at the Bank, regardless of type of deposit or account, and the
Cap Rate. "Cap Rate" shall mean, the "Cap Rate" identified in the attached Schedule A-1 that cOlTesponds
to the Average Daily Fed Funds Target Rate set forth next to each such "Cap Rate." For example, if the
Average Daily Fed Funds Target Rate of interest for a period in question is: (A) 2.50%, then the "Cap
Rate" is 2.50% for the same period in question; and (B) 8.00%. then the Cap Rate for the same period in
question is 7.25%. For all purposes under this Agreement, the "Average Daily Fed Funds Target Ratet> is
defined to be, for a calendar month in question, the average of. (A) the Fed Funds Target Rate as published
in the Wall Street Journal on the fIrst business day of the calendar month in question for each day during
such month until,sucll time as the Board of Govemors of the Federal Reserve System changes such rate;
and (B) for each day during the month in question after the day on which such change in rate is made, such
changed rate. By way of example and to avoid confusion, if. (X) the Fed Funds Target Rate as published in
tlle Wall Street Journal on November 1, 2006, was 2.000,1" and (Y) on November 15, 2006, the Board of
Governors of the Federal Reserve System increases the Fed Funds Target Rate to 2.50%, then (Z) the
"Average Daily Fed Funds Taxget Rate" for November 2006 would have been the average over the 30 days
for the month of November 2006 of 2.00% for the fIrst 15 days of November 2006 and 2.50% for the
remaining 15 days of November 2006, or 2.25%. In the event that the Average Daily Fed Funds Target
Rate is greater than 8.0%, then the Cap Rate shall be deemed to be the Average DlUly Fed Funds Target
Rate less .75%.
Notwithstanding the above, with regard to any deposits attn"butable to Constellation Trust
Company, a Nebraska trust company ("eonstellation"), any fees payable to MSCS will be reduced by the
sum of: (a) 10 basis points (0.10%); plus (b) the "Bank Account Interest Rate" as defined in that certain
Subaccounting Agreement dated as oiMay 11, 2005 by and between the Bank and Constellation (a copy of
which has been reviewed and approved by MSCS). By way of example, if the "Cap Rate" as determined
under this Exhibit A any for a period in question is ordinarily 3.000% and the ''Bank Account Interest
Rate" for the same period in question is 1.000%, then the Cap Rate for thepmpose of determining the fees
to be paid to MSCS in respect of any deposits atfributable to Constellation (and only the Constellation
deposits) shall be deemed to be 1.900% (i.e., 3.000% minus 1.000% minus 0.10%).
Notwithstanding the above, with regard to any deposits attributable to MG Trust IRA Investment Account
. (identified on Exhibit B) and any similar account added (to be mutually agreed upon), any fees payable to
1980
BXHD31T A TO THIRD AMEN])E]) AND RFSTATlID ADMINISTRATIVE SERVICE.'3 AGREEMENT
MADE AS OF JULY 5,2007
PAG52of3
MSCS will be reduced by the "Bank. Account Interest Rate". By way of example, if the "Cap Rate" as
determined under this Exhibit A any for. a period in question is ordinan1y 3.000% and the "Bank ACcoWlt
Interest Rate" for the same period in question is 1.000%, then the Cap Rate for the pwpose of detemrlning
the fees to be paid to MSCS in respect of any deposits attributable to the MG Trust IRA Investment
Account shall be deemed to be 2.000% (i.e., 3.000% minus 1.000%) •
. Notwithstanding the any of the above, with regard to any deposits attributable to CPI Qualified
Plan Consultants, Inc. ("cpr'),.1he fees payabJe to MSCS with regard to providing Administrative Services
to CPI shall be equal to the "CPI Revised Cap Rate" as shown in Schedule A-2. For example, with regard
to any deposits made at the Bank on behalf of CPI only, if the Average Daily Fed Funds Target Rate of
interest for a period in question is: (A) 2.50%. then the "CPI Revised Cap Rate" is 3.25% for the same
period in question; and (B) 8.000/0, then the CPJ Revised Cap Rate for the same period in question is 6.50%.
Average Dally Federal
Funds Target Rate
0.50%
0.75%
1.00%
1.25%
1.50%
1.75%
2.00%
2.25%
2.50%
2.75%
3.00%
3.25%
3.50%
3.75%
4.00%
4.25%
4.50%
4.75%
5.00%
5.25%
5.50%
5.75%
6.00%
625%
6.50%
6.75%
7.00%
7.25%
7.50%
7.75%
8.00%
Schedule A-I
2
1981
CapRate
1.500%
1.625%
1.750%
1.875%
2.000%
2.125%
2.250%
2.375%
2.50%
2.625%
2.750%
2.875%
3.000%
3.125%
8.25%
3.50%
3.75%
4.00%
4.25%
4.50%
4.75%
5.00%
5.25%
5,50%
5.75%
6.00%
·6.25%
a.5OOk
6.75%
7.00%
7.25%
EXHlBlT A TO THlRD AMENDED AND RBSTA11!D ADMINISTRATIVE SBRVICES AQRBEMBNT
MADE AS OF JULy 5,2007
PAos30f3
Schedule A-2
Average Dally Federal C P I ~ s e d
Funds Tget Rate Cae Rate
0.50% 1.750%
0.76% 1.875%
1.00% 2.000%
1.25% 2.125%
1.50% 2.250%
1.75% 2.375%
2.00% 3.000%
2.25% 3;125%
2.50% 3.250%
2.75% 3.375%
3.00% 3.500%
3.25% 3.625%
3.60% 3.750%
3.75% 3.875%
4.00% 4.000%'
4.25% 4.125%
4.50% 4.250o/c.
4.75% 4.375%
5.00% 5.000%
5.25% 5.125%
5.50% 5.250%
5.75% 5.375%
6.00% 5.500%
6.25% 5.625%
6.50% 5.750%
6.75% 5.875%
7.00% 6.000%
7.25% 6.125%
7.50% 6.250%
7.75% 6.375%
8.00% 6.500%
3
.,.- 1982
/
".
ExhibitB
To Third Amended And Restated Administrative Services Agreement Made
As of July 5, 2007
Account
Number Account Name
MGTrust
Constellation
Constellation
Frontier
Unitized Account Name
MG Trust FBO
Managed
MGTrustlRA
liwestment
MG Trust FBO Bisys
Mg Trust FBO Mutual
MGTrustFBO
Managed
Quads Trust
US Bank
Tax RemitNC
STC Stale Checks
MOO Companion
\.
1983
TabC
Exhibit 75
1984
r
1
·t
,
, I
!
•• • ......... M _ ... _._ ...... - • .. .
SECOND AMENDMENT
TO SUBACCOUNTING AGREEMENT
, .
• - ,.. - ... 'M, _._ .......
__ ._u._ .............. of ..
Tbis seCOnd 81IleDdD1ent it :otade'a$' ofDetemb.eJ.; 30 .. 2010: (the "Amendment' between
Li.C {tht> "Nom1le4)1 and OnitQd. Western Colorado (the
"B8nk!,);.
WiJERE4S. are pBJlies.tQ thet certain Subacconnting
made. as of Augn.1t 1S
f
2010. l\greeiJ,lenf.") w.b.cteby on be'balt' of
the Nominee's clients and at the: ditectiOil ()f the NQDliJlc;e-'1l clients, diteeis .fundS at the Bank fot
the- primarYpQ:rpOse ofh.cilitatirtg and sale Af and other
in:vesi:arumfs. and not iii a CIi;Patn'ty 0' a and :
. WHEREAS. thQ seek to a,ned;d
effecBve immediately jn order to allow tbe to· lJPon tlle Nomi'nee to diteGt the .
NO.lDinec'i' s funds: to the to: am,Qunts ,greatc.t.:than: orlgbud1y in the
Agreement; and
WBEitEAS. the· Nominee' and Bank that tiine i$
NOW in consideration of thc'1'(lUttuil.p1'OnUSes herein obntained;,
Notninee and Bank to ·be·leplly bound by tho terms of'this. Amendment sa follows:
1.
Etrect or this AmmdiDent
1'lI&leDDS of .this Amendment shall be to supersede any and aU
iriconsistent tenns: $.ubaCC01SJlting Agreement. All other· teD Subaccounting
Agreement wbich are not inconaistent with this shall in fullfon:e and affect
notwithstanding anytlrlng to the con.ttaty herein'. .
Amendmenf to Subascoupting Agreement. Section 6. Target Balance .and Maximum
Baltmtt .' ..
Sectipn 6 of the- S).lbaooounting Agtee:menlis. amended as 'follows:
1985
.;
'j
I.
j'
l-
'i
I:
December 30,2.010 by and between Legent Clearing ILC and TJilited Western Bank
Page 3
IN WlTNF..sS WHEREOF, with the intention to be bound by the tem1s of this.
Amendment tlw parties bave executed this Amendment as of the day and year fitst above written
by causing their respective authorized representatives. to sign where indicated below.
J1J
Title: &fO
UNITED WES1'ERN BANK

c.;am.f;S R. Peoples
Title: Cbajnnan of the Boarcl and Chief
. Executive OffiCer
1987
TabC.
Exhibit 75 A
1988
SUBACCOUNTING
dated as ,of A\!.gll$t 18. 2010. is riiadebetween :United Western
B,apk ("BaJ:d('1, a federal 'Qank." otgaili2:et1 and under the iaws :of fue tJDited
States of and Legent Clearing·LLC, aSECJtegistered 11Us
.all agreements related to a FDIC Sweep Program between Bank.and·
Bank will matce a'VaiIable, ott a. regular and continuoU$'b'asis, to. Legen,t shall tJ.ave
a separate acCQunt at BQD.k to :establish, for the of of Legent
one or deposit aoo.ounts" ("MMDAs'1, 'as defiD.ed inSectkin"204.2(d)(2,) of'
the regulations of'the 'Federal Reserve Board (12 C.F.R. or il<;countS· a.uthonzed
by 12 U.S.C. § ("NOW Aee\lunts'') to be main(ained at Bd (MMDAs and NOW
Accounts. colleCtively,the "Aeeounts'1.
- ,
WHEREAS. }Agent is ·a,cting or . broker, foi:
intrOducing 'ip:vestlnent adviserS introducing
advisers, coUectively, and "Customers?', as defined above, m.ay Customers of
suchIBDs'
. .
WBEREAS, and Deutsche Tru$t Company of Ainerica ("DSTCN') or a
successor have entered into an agreement for DBTCA to provi4e servicC$ in to a FDIC
(the 'Trogramst) fot mDs Citstoiners (the "DBTCA Services").
services include acting as agent for Legent in preparing and maintaining records of
beneficial interests; calculating interest fot. Cus.tpmers, calculating fees for serviceS perform,.ed in
relation to the services, acting as a Settlement Bank and acting as a Qualified Interiilediary Bank;
-and .-
WHEREAS, Bank Wishes to the Prowam. by actepting deposits from
Legent aIld incur certain pursuant to terms set forth herein in. such a way-that, under
the reguiations of the Federal Deposit Insurance Corporation ('TD.IC") (l2 C.F.R.! 330), each
Customer's peneficiai.interest C'Benelicial in ea.ch ACcount shall be eligible lobe
instited fO the maximum extent pettnitted by the· FDIC.
NOW, THEREFORE, Bank f,lnd Legenthereby agree as f()llows:
1. Effoctive Date. FolloWing the ex¢cution of this Agreement, Bank's
participation in the PrQgram with respect to receiving deposits nom Legent will be on the terms
and conditions set .out intbis .The date on which it is mutually agreed 'by and
that the Bank is. participating in $e Progtain pursuant to the tems of this Agreement
shall be the ''Effective Date.... .,-
See«on 2. !Je.neftc:ial!nterestsln the Account:
(a) Legent and or its agent shall have {:!riticipal responsibility fot (i) recording in book
entry form the Beneficial Interest held each Customer in each AccQunt at B.ank. an,d (ii) iQr
assigning such Beneficial In,tere.st an . identifying .
1989
.8_ that, '_r _ of the P1'Qgraui" the
dqlosjfed' fo.r the bep.efit 9':8: Customer in Accounts·maint8iitecl at. Bank: on. any cky.s
wIi.en. aggtegatedwith the Customerts Bent;fiCiaI Interest in the A900unts as of t1ult will not
exceed _iy-five (95%) of l'ilB.irnu:n;i Qf .FDIC iD$UI8ilce 'available for
deposit by CUstomer in same ·snd at .B_ (the
"Beneficial Inte ..... .ex.cq»t as agr,ee4 .to by Legent, ·end tt,at n. is the
0l:·Legen.t, (or DBl'CA as its to ensure that deposits held·at Bank for the
benefit bf any Customer do not ex.c;eecl the Beneficial Lknita.Qon.
,;, S •• .... to. -.I ·in acco...;a ..... _ .... with the terms .and. cond'';' f' thi j\_ ........ _,
.... . 0 S ............... t,
Barlk ,hail accept for dq10sit in the Accolint&. funds delivered by DBTCA. 8$SettIement Bank
UPOIl instructiDDl fiom Legent
. (d.) l3anlc. nO to· Of that the amo1,Ult of deposits
__ taiIl.e4 by .a ·Customer with Batik (toes not exceed the. maxUnum amouxit insured by
FDIC, whether or in combP,latiOIl other fund" the .y
mabl1ain 8apk outsi4e'the
8eetioli 3. TtU7nS and Coiii/Jti6118 ofthtl Accounts.. Unless by law or
.. ';n· 01._ ..... rf4, ... 1...... h Account shall be \1"1"'--_.1 by ... foil' . . and
rejS---"n, LWf qree _ . _ '. . go \ol'-'"' owmg terms

(a.) UnleSs required by Applicable Law (as Sank will 8Qcept no
a in an AcQ.OUlit unless- such insttuCtions
ate directed by Legef¢ or qutdified intermediary· bailk ('-Qualified Intel'Dlediary on
behalf ofLegent, which for this purpose shall be DB.TCA Bank. is IlQtified to the in
.accOrdance 9. If Bank rec;eives inconsistent instructioil:$ ftom Legent and from the
Qualified IIitelmediary Bank, and Bank cannot after reasonable inquiry resolve the incQnsi$tency,
it shall be to .upoJ,l the ·recei-ved fi;OQl As use4 In this Agteen:!.ettt,
ULw" rn.eans 'any law? rules or policy of anygovernmentai
.authority (and itS. instrumentalities. and political subdivisions tbe.reo(. including states,
provinces. anc:l of COll).petetrt relevant judicial inteipi'etations thereof,
or any rule or futerpretation of any·self-reguWoty organization of CO.mpetent jurisdjction
("SRO,. that is applicable to a party t.o in ooDileCtion with the actiOns reqUired
to taken by that pursuant to this A8feei1iem as. the same is in effect from time to time.
and shall include. without limitatiQD.,. Regulation D issued by the Fodera! (12
C.F.R.
(b) Wit:hdra:wals from the ACcounts Will be' paid by Bank. only upon instruction of
Legent or a Qualified by uansmitting funds t.o one or pre;-(ie!$ignateci
dqJosit a.cCOunts (the "S'ettleD:tent Aceou.ti, maintained. at a·desipted bank (the ''Setilemeat
Balik") ·for the pmpose of settling-funds to be transmitted to 1lte Settlep1ent Bank
sha)l be DBTCAPDless another 1>aoJc pUrSuant to Section 9 of this Agreement or .
until becomes the Settlement lJank purSUant to this Agreement. Bank will be re.lea$ed from
all liability to the to ·this Agreement Such withdrawn funds Bank transmits or
delivers those tunds to the Setti_ent Accounts.
2
1990
(c) is. fcir tli,e actions Qualified mtermediar}rBank;.
DBrCA or the Settlement Bank with to the. Program or otherwise, in connection with this

(d) 'Sank ma.y, wi!h deterniined iIl. its faith. discretioIi,. refuse to accept
a. deposit 1ron'i or Oil bebalf of Legent that maY cause Bank tQviplate. I;llaw Qr'a
good faith 1h.at tbedeposit by error);
(e) . There shall be no nli.nnntUn initial depositfor any Account;
(f) Ban.k sballpay :tothe balances in the ACC9u.nts m
Secti9D- 4; provJde«, how eyer, tl1$ no Interest shall be paid except asaIlowed by
law and as stated in any deposit acCOunt _$feement (an "account .entered· into
between Legent and Bank (subject to Section 17(1) be1.ow);
There pe maturitYol;t .any Accotuit;
(h) Notwit.hstandbtg anything to the .contrary herein:, Bank reserves the right to. require
seven (1) calendar days prior notice of any withdrawal offundS from fmY MMD.i\., as by
Applicabie Law, and by Bank. such will not constitute a waiver'
by Batik of its right to 'require notice for subsequent withdrawals;
(i) Subject to. Sections 3(d) and 7(d), there no restrictit)D on the or nJUnber
of additional deposits to the;
(j) Nt) tranSfers froin an Account. shall be petmitted;provided" however,. that
withdrawals shall be in with this Section 3 ap,d, Section 7 hereof;
(k) .Each Account and Beneficial Interests therein $hall b¢ subject to. any and all terms
and conditions :as may from time: to time be imposed on any Account by Applicable 4w;
(1) Bank acknowieciges and that all funds into an subject
to Rule under the Securities Exchange Act of 1934 (the "Exchange
Bank acknowledge-sand agrees (1) that all funds deposited into an ACCQunt are for the exclqsive
benefit (If and. 'funds ate to held separately frcim any other a;ccouilts
maintained by Legent at Bank, and (2) that :the balance in any Account shatl.at no. nine be used
directly or indirectly as sec"Urlty .for a loan made by J,3ank to and shall be to nQ
security lieh. .or claim of any kind favQr of Bank or ,my person claiming
through Bank. Notwithstanding the foregoing, Batik may take action to reWIn funds deposited.
to an Account, if the return. Of adjustnlent is by the Uniform COI1llIl<;lrcial COde ora
funds trail$fet system rule, without limitation,. an unaUthorized or duplicate w.ire; and
(In) Bank shall provide With (i) Account number$ balance$ to. permit Legent
to perfonn the daily of the balances in. the Account as required for cOnipliance
with Rule 15c3-3 under the Exchange Act, and (ii) ·.any additional info.n.nation an4
reasonably requested by. Legent to reconcile between reco.rds IT!aintained by
different parties to this
3
1991
· Sect:[on 4. Consideration Paid by Bank/of Servi.ces Provided.
(a) :Each A¢<>unt accrue simple interest daily at the. interest. rate set (orthon
Exhibit A. and such interest shall 'be b.y (i) QlQnthly to tlte 9f the,
on the day bisttilcted by .at which time. it shall interest, and (ii)
on tne date that aU 'of a Customer;s Beneficjal Interest$ m ,an under
withdrawn; and shall be paici \'YiU to accrue on funds deposite.d to the
Ac:COPiJ.t on the day on which such funds are credited to the Account and will up to; but
not including, the day on which funds Wifu<lmwn from that Account.
(b) ,B.anksfudl'p'ay total cOQsidera,tjon with respect tQ the AcCOunts in the amOunt set
forth oli Exhibit A attached hereto. Such total Consideration n,ank PIf,)'menf')
stuUI consist of on the to· be paid, tQ CustQmers d,?scrib.edin Section 4{a)
above} ail. a'doil'nistta,ti.ve fee (the (CAdministranon paId to both nB'TCA forproviding
the OBrCA Sem.cesand 4gent for providing. the' and
reconciliation services purs.uani to this The: Fee. is set forth on
Exhibit A.TIle total amount of interest With respect-to the' Accounts shall be the of Ihe
interest payable with respect to in the A,ccQWits held by all CnstQniers
the corresponding period PUi'$uant to Customers' agreements With Legent (or IBDs,as,
applicable), and shall be at a rate suggested by Legent apd accepted by" 'The
Fee shall equal between (i) the Maximum Bank Payment and (ii)
the aggregate of'the interest payable with respect to B.eneficial In:tere.sts held In the Accounts by
all Customers during the corresponding .mon$. as calculated purSuant to Secti<:>n.4. The
interest rate shall be :reset on the first BUSiness Day of each month (the "Interest Determination
Date") and shall becpme effective on the third Bus.m.ess Day of that month ·Reset
For purpQ.ses. of this Agreement" a "Business Day" smut meaIi. any day on Which the
Federal Reserve Wire Transfer System is open for business.
(c) No later tium three (3) Business D.ays after written, (the
Pllyulent, request") from Legent .or itsa.gen't,; request: shall be made no less frequently than
once each calendar month (but not during' the month of 'the Effective Date. and no "111ore
:frequently than fiye (5) tbneis per caiendarmonth), Bank sMUpay DBTCA. its portiot;\ of the
Administration Fee for the Program. The Administration Fee shall be :sent. by
wire in the manJ.1er. described in . 7(a) of this an accQunt "Operating
Account") to be at PBTCA.
(d) On the day of the fee payment request, Legent or its agent shall provide Bank With
a report setting out the in apcordance with, the .preceding paragraph of (i) the
Bank Payment and (li) the Adminilrtration Pee.
Section 5. Method of Delivery o/Transaction Information/or the ACCQunt. A Qualified
Intermediary Bank Olay on any Bl,ts,iness Day send to' transactio'p. about an
ACCQunt by deliveriI)g to Bank on each Business Day, via file facsimile" or
in person by messenger; ·subjectto any reasonable security ·procedUres as may reasonably be
by about the Account comprised of the amount of that
day's money movement, calculated pursuant to Section 6 below. In the event that Bank receives
4
1992
Qualified Bapk it d.fSUQhfu)JdSon. bebalf'ofLegent, and Bank
such .funds to the Settlement Account m a®Otdance with this Agreemeat.
(f) If (or a .. ptoced.utes
to· depos.t. fi1nds into at W.ith<bw. frOJiL Bank; bUt Bank fails to· timely· credit D:utdS to ·or
debit .fuitds :&om the &p'propriate Account. Baok "Shall be. liable. foJ:' intefest, other and
losses :&om $Q9h tQ the it be its
fur a failure to timely"credit or debiU\mds.
(g) NotWitbstandingparapph (f) of.thi$Sc;ctiQn. 7, Bank. sb,all to Legent,
$JlY for any los$;. delay, COS4io§thrterest,
or Uability to the extent that it "ariSes 1mm: (i) the actions or omissioDS" of J)BTC.A. I\.
IntermedierY Qr .Who. not rea$O.na'6te 00 .y
breach of this DBTCA or -its apts; or a breach of"ail.l' .tepreSentation or wamm.ty
by (iii) a· of the Bd (ICC,OUnt by a I.e. (lV)
or :omissioit in at intOrIIJ.eti"on provided to ·8aDk by Legeht or
DBTCA; (v) anyetrOt, failld bi' delay in the·tiaDsiIiission or delivery of infOrmation or
orcb:$ dUe" to a break:@wn: in .y Of. cqIDIIiuIdcatioQS t11cility the; reasoJiable
.control of Barik; (Vi) causes beyo.n<f, the reasonable comol of inciuding
labor disputes, civil UIl1'e.S.4. fire.;. floQ.d, -.er dfunage. (e.g.. from fJm suppressiem act,s
8I,ld ads Qf God; (Vii) the of gQveimnellt or
.rUle; .guideline, policy or regulation; (viii) the lack of available funds in an·Accountto complete a.
traD$.action; or (Ix) Bank's inability to to its. sadsfa,ctic;;n tb,e identity or
c.ontinuing authoritY of any pmporting tc,l act on behaltofLeaent, DBTCA, ot a Qualified
Intermediary Bank •. Any chUm, action or proceeding to. " cl" 7(fj or tQ
recover for Progtam-related, QlUSt QOnunenced within one yeat from the date that the
event giVing rise ta the action or proceeding Drst OCCUd. tegent tocoope.rate
le8.Son8bly with Bpnk in any 10$8 .ons B..m to reduce any qf, liability
·tb,at arises iIi CO{lllCCtion with the Program.
(It) ·Bank shall use its .best effurts to initiate· the· same-day moneY transfer to the
.Specified Settlem.el;1t Account required for a p1ltS\Ulnt paragraph (a) above within
forty..-five (45) after receiving instruttionsregardiIig the amount to be Withdl'a\lYili and In
any event by (i) 3:15 p.m. New York "tinle on the B"us_s Day on are·
prOvided t\tat ·ins.tructi;ODs later than p;m. ·New ¥ 9rk time
on sUch Day, and by (it) 4:45 p.m. New York time on such Bu.s1neSs Da.y that
su¢b instructions·are reQeived:by not later 4:0Q York time.
·SediQ.n 8 . . E$tablishing Direct}.loriq Marie'St Deposit .Accounts. If a Customer·desires
. to transfer:a Beneficial Interestin an hcount at Bank to MMOA In the Customer's name on
the bQoks. of the aank, Bank agree.s to an: for-the. Customer in the of
tacts constituting good cause for decfining"to Open an account fora similarly, situated Person who
had not ..,woipated in the Program. Legent agrees to accomplish this by (i) ·instructing DBrCA
to withdraW CUstOmer's fuilds from the Account pursUant to the pro'\dsiOl'ls oftbiS Section·8
aind (il) making·suitable arrangem.entJ as ate agreed upon with the and Bank: fortbe
Bd to Ie98;'ve aU or of the ot)uclt. the MMDA at suc1i
6
1994
o[LegtJIt
(a) :Iii to iis.other responsibilities under lhis Apment, LegeDt acknowledges
.
(i) Witll teSP.ect ACcQ1,1D.ts in the name of Legem for the· benefit of
its Cuitomets, bas pii,I:nary re.sponsibility f'Ot coInPlitJ.n.ce. with Applicable La,w
regarding the and
Le-genf sltaU iDm1ediately adviSe' Bmk: lfOn ·any oral Of written Qf
making. ail internal. tllat j$ l1Qt in 'With any s1,tch
I.4w. .
. (il) Legent bas estabiished. and ·will.maintain a written anti.-molley laundering
compliance program. reuQD3b.ly With Law
the IB;underiilg and the fin:ailcingoftenoi'ist
(iii) During the term. l)f this Agreement; Legent sbaU establiSh; document and.
. IQamtaiti a written. customer iden,tificatiQn meets the t1.l.e
tegulatioIl$ promulaated ttnderSectioit. 326 of· the USA 'Patriot Act of 2001
Program").. L.egent admowJ.e.4ges th;lt B_ is. on the
and its mDs of the of"its C.I;. );lrogn\!li With *Spect to each A.ccoUl'lt"
'opened in the naIile of Legent for' the benefit of its Customers and that Legent's
c.ompliance with thi$PQragmph ("ill) "is required iIi for Bank to:so rely. tAgent
agrees that oil the "date an Accbunt is first Qpened at Bank in the name of and
on ·each 8nni"ersary of such date, Legent will, of Bank. flunish to· B8nk a
in form and $.UbStance acc.eplable BIUlk statmg that Legem is in
with the requirements set forth in this Section 9(a).
(iv) Legent represents .thllt it (an4 IaD foJ" which it:acts as •
'btolcer) is a "f;naJ:icial 8$ defined by the Bd Secrecy and subject to
the launderin$ compliance programrequirem.ents of31 U.S.c.. § 5318(h).
(b) Lege.nt authorlze4 tQ d,eJepre certaiD. of its un4er tJ$. AgJ:eeinep.t,
those set t'Qrth in (a) to one or more agents bfits choosing. provided
however, . that Legent shaI1 first provide. Bank with w.ritten . notice of election to delegate.
certain of it resp9D$ibiijties and shall provide its prior written: coiJsent to such ptOposed

. . (c) Legent shall. be, responsible for of all required. to be withb.e14 under
applicable law in with fbe paym.ent or cIedit:fug of any interest on anY,
. Jnterest Utan. ACcoUnt to the apl?rOpriate or its designated
(4) Bank shall have no to: (i) maintain "books 8Jld records the
name, ownership. aJid social or tax identifioation of any Customer or other
person holding an interest in an Account, ott. than the nmned: holder(s) Qf the Account, (ii)
prepare or file, any DlllY be required under the Revenue Code
and applicable repations theieunder with to any person holding an interest in an
1995
Account, the D8IIled holdet(s) ot (iii) to notify persoil holdlnJ an
"" interest in an Account, ·ormy taxes required to. be withheld under applicable. law in C9nnectiOn
with tb,e Qt crediting of any inter. to S\lCb,
(e) Legent'aclmowlqeS asreesduringthe tenD. of1his
(1) Leg. will, UpOJi request, provide Batlk _ D-.tal. and external
auditors and inspectors as may froiD. f;ili1e to time desigoatt, with -an ie8$ollitbie
assistance with to all petsoDilel" data. and Qther information
'and rds .. h.d;",'" Confidential hafoni1atiOn,:88 below\ . fT relati . M
. .. .'. ./ 0
com.pliahce with this Agreement, all locations or 1m .tS where
the fore,soinl. bilt only for the purppses of and anc;t
subject to Bank
1
s. regarding out· in this
A.....-AA t.
..... m.eu
Cli) Bank. and its intem8l shall have the rigb.t to. $tCh
copies. 8l'O. nec.ess.ary". of' .my Co¢id4m.tial InfqnnatiOn lind other to fhe
extent they relate to ., performance of Legent's obligations·under this with
the and pxograrnming tI;$de t¢cluiology,"
4esip, oopyrlghts aDd patents. Such: shall be takeii only fot the purposes
of intema1 and extetna1 audit and subject to Bank.·sobligatioD$ regar.ding
Int'QrmatiQn set '.
(iii) If Legent or its agent receives" a request for information from. the office of
·theCompfroUer of the Currenc.y, Board of Governors of the Federal Reserve Board or
Reserve FDIC, Office of Thrift Supervision, or any state
agency (eacha'''Bank Regu1ator'):r that superv.isesBank; or tIom Bank. where Bank_
request fQr information frQlll a Regub¢or the to which-requires
:J;;;egent·s assistan(:e, which ,re.lates tc? any obligation .df l.egeitt under this
Legent $hall provide the reque.st1ng B.1mk R.egulato:r. prQmptly upon being reqt,dred to do
SO; witll: andaljdit. rights at all tiri:le.S, ·i1l.cluding·access to
all records (including Confidential Information) held by 'Legent or its agen4 access to
b1spect of its agent, and all Q1:her necessary in.
coIiliection. with this 'and its ..performance.
. (iv) The auditing and insJ*uon rights shall survive the. term of this
Agreement for a, pf n9 . less than si?t- y" on of year jn
which thiS is All relevant documentation must continue to be
aVailable dUring this period •.
(f) . For p\u"poses -oftbis IBforiDation" inelU1S aU Ct,istoItlet
rec»rds provided by Legent and its agents. including "ilonpubUc persona) iDfomation'; M
defined in 12 C.F.R. § Z16.3(n), other than publicly available
Section 10. Intentionally o".;tied..
Seeticpn 11.I"tpttlonally, oniltted.
8
1996
12. Reptesentatitfns- and Warrtinties oJBank.
Bank make.s:the. representations· and to LeF.nt. as fOllows as of the Effective
Pate an4 at au at it OJ; Diaint'!ins a to an Acco •.
. Agr¢en;teilt: . .
(a) The and of this AgreepleJlt by a- have
aitd reqUisite action On the part neither·the exeCution not
the delivery of this Agreement nor tile eoDS1U)11D(Jtion 'Of the' transactions eontentp..a.hereby
nqr the ." nor fulfiJtn:ie1it of and provisioJl$ ,of 'this will
confliCt With or resutt in a breaCh of terms,. conditions or provisions o( or constitute
Under, ofB.
(b).B_ i$ a tIl 12 U.S.C, § l&l3.(c)(l)),. the
depOsits otwbicluue iDsuted by the FDIC.
(el This Agreement.hIIS been dulf authorized, exequted and delivered by Bank IPld
aleg8{, va.Hd 8nd binding ofBank,. enforceable against Balik iilaccordan¢
with its as may be Iil'nited by (i) bankIupqr laws and other simiiar laws affecting
the right$ ot gene,rally, (ii) Ba bas. PQwer
to do and pedorm by' this
(d) Bank acknowiedges and agrees that Legent and its agents and 'representatives shall,
without t,b.e prior. in instance 4isqlose tlIe
the Program. as ·such.
(e) Bank that for of Section 205.6 ·ofthe Federal Reserve Boatel's
E{12 C.P.R. § 205.6»; notice of fund given by a
CustOmer that is a "COllsu.ttleI''', as defiD.td in Section·20S.2. of 'that tegulation;to Legent
notf,ce. to BaQk. " ..
(f) Bank 'shall hiUnecUately nOtify Legeilt in writing upon becoming aware or when it
'shoUld have become awa:te that any otthe representations ot warranties by Bank pursuant
tQ . this Secti.Qn.1.2 is no IQ.,: qge. ;
Section 13.. a.nd of Legent
Legem IIl8lCes the folloWing representations and warranties to Bank: as of·the Effective
and at all.times that this. AgreeAlCnt is in
J4ent i$, sbaU to be during the of this Agreement, -(i). a broker-
deslertegistered with the Securities and Exchange Commission ("SEC?') pursuant to Section
lS(a) .of " the Aot ancl witla each state or .other in whiqb it is required to be·
registered, and (il) a member in g.ood Standing ofFINRA.
(b) This Agreement has been duly authorized, and delivered by" Legent and
CfOnstim-. a legal, valid and binding of Legeui, against Leg. in
9
1997
w.ith its except may be by laws _ similar
1a:W$. the dghts of QrCditorS :geneta1l1,.and (il) principles .of equity. .
'ee) Legent and any a.gent· to· which Legent 'tJli$ ..
the systems, tQ the for safe.
sOund operations as set'fcjrth in 1lte FFIEC InfortrtatioI1 SysteIns Bxantin3tiC)l[liandbook.
. (d) Legent shall notify Btmk m writing (1) JlPon pet;omiilg aW8fc or
'it should have' that any represen_tion by iii this Section 1'3 is fio Ionget'
.1:rOe.
S.do .. l4- Inde1nni/icat/Q1J.,
(1L) B. and .hold a.t its
agents and eiIlployees ("Legei1t IIid..enmified from and againS,t any and .u
elaiu.ls, cWnage.8. or liabllitles, inQluding aU spits. proceedings; de1ll81).dS.
judgJ;nents, fees inCident to 811y of the
f0Ie8oil1g matters (other tbali attorneys' fees not See.tion 11(h)(li)(B)
. 'belpW), reesoilable «lSts. Charges· aild expenses any expenses
frOm any investigation or.inqUiry) with respect to the participation. of.officers. and empioyees of
Le.ge.nt Parties in c;lefel1$e there.o(·W which a Legent Party may becOme.
subjeCt that rellUtt frOm (i). any misrepresentation, breach of wari'aD1y, or material
at Bank under this and (li). any tbJrcl party
or btoljgnt a Legent Indemnified Parties (A) arising out of saY failure by
aank'W OOiliply with the provisions bf this· AB;reement or dtty Applicable Law; or (8) arising out
. of the gross or wiIlfil1. of Bank. Bank p,:oin¢.y xeimbur$e
Pames for aU owed under this from time to time,
upon receipt of'a 'Written re.quest from Legent Indcmmifl.e4 Party, QS sU.. m:nopms are

(b) Legent agrees to indemnity and hold harrniess BaIik. and each of its members,
managers, .officers. d.irec_ agents and employees ("Bank froP.l and
against anY·lJ11d fJlllosses, claims; c;lamages or liabilitieS. penaltie$. on, def'icl:ent. deposit
inCluding all suits, adions, proceedings. assessments, judgments, ·CQsts,rE;aSQn.able.
attQmeys' fees and expenses w· _any Qf-the matters (other thaD. attorneys'
not P1:!1'SU81l.t to 17(hXit')(B) belo'W), including thOse reasortabl.e cOst$,
charges and ..expenseS. (in..cluding any Ie$Ulting from any invest.tgatioP.. or inq¢ry) with
respect to the officers IU,ld jil defense thereof; to WhiCh Bimk·
IndemiJified Parties may. b.ecome that arise. 'out of or xesult 110m (i) EUly material
misrepresentatiQu, breach or by or material nonped'onnflIlge'
'of Legem or any 'subcoritractor or agent of Legem under this AQteement; (ii) any third party
claiM Of' action threatened 'or brought against.the. Bank Parties (,A.) out of Qr
to any claim. that provision or of the l'rOgr-am or any portion thereof
coliStitutes an iIifringement; violation. 1respass, contraW.n'tion or 'breach of any patent,
or other propertY -or pioprjetary right 9f' any third party, or co1'lStitliteS tlie
use 'or miSappropriation of any tmde ·secret of anY' third party; or (8) arising.out pf
10
1998
any f'allure b.y Legent ro. cqmply Law; ot (G) ariSing Qut of the gross
.negligence misconduct of or (iii) the actions, b.reaches;ettPrs or issues set
forth in each of the items (i) - (ix) found J:nSection 7(g) Qf lhiS shall
PIQIliptly re4nburse Parties for all amounts owed under this Section 14(b)
fr.O"m time to time, upon receipt of a written request from any Bank Indenmified Party,as
am:ounts are ..
(c) If a by a .party i$ made any Indemnified party Utidet this
Agreement and ifany indemnified party. intends. to seek indenm.ity with respect thereto under- thl$
Section 14, the in4enlnified shall promptly notify orie or mote of Bank or Legent,as the
case may" bf!. of such claim. The indemnifying party shall have thirty days after receipt of
the J:lotice tQ unde.rtaket Conduct through of if$ own
choosing (subject to the consent ofth.e such consent not to be unreasonably
withheld) and:at its tb.esettlement or the.-eof. the shall
Withtt in carip.ection therewith; provided that: (i) by taking such conduct or cOri.trol,
the "indemnifying partysball not prevent the from :any .lien,
enc.umbra,nce Qr otlter adVerse charge uPQn any asset of party; (n) iii the event it
appears likely, "in the reasoruWle judgment of the indeinilified party, that different .defenses are
available to the indemnified party or that a CQnfliot of inteI:est arise betwee.Q. the"indenmitied
party and the with respect to ·such clai.m, the indemnified party shall choose
its own counsel, and the fees and expenses of such counsel shall be bome by the indemnifying
party; (ill) in the event it that lJ,Q coptllct of interest the indemnified
pf,U'ty and "the indemnifying party and the indemnified patty desires to choose its counsel, the
indemnifying party shall per.thitthe indetIUlified party to participate in sl,lch settlement 01= defense
through such chosen by the party, that the feeS· and expense.$ of
such counsel shall be bome by the indemnified PartY; and (iv) the indemnifYing party sha1i agree
to reimburse the party for the. fWl amount Qf any lQss reSulting from such
claim and all related expense$ reasonably inC'Qlted by the irtdetl'lniffed party within the limits of
this Section 14. So long as the indemnifYing party is contesting any S1lch claim jn
good faith, the indemnified party shall not pay. Qr settle any SUch claim.· NOtwithstanding the
foregoing, the indemnified party shall have the right to pny or settle any such claim, prQvided
that in such event the indeIDlliti,ed shall waive any right tq indeinnity· therefore by
indentirlfying party. If the indeJ1lllifying partY c,ioes not notify the indemnified party within thirty
(30) days aIterreceipt or-the indemnified party's of.a.claim that ii
elects to the defense the.reof, indemnitif;ld PartY shall AAve the right to contest,
settle or compromise the claim in the exercise of its .exclusive disctetion at the expense of the
indemnifying party. .
(d) In no event shaUany party be liable for loss of goodWill or for special, .indireCt,
consequential or incidental damages arising from such party's breach of this Agreement,
rega,rdless. of whether such claim arises in. tort or in contract. No claim may be against
an indemnifying party more than one (1) year after such claim. has been lawfully asserted against
an indemnified party. The provisions of this apply ·even.though the loss or
irrespeCtive of caJ,lse or results, directly or either from performance or 1,1on-
perfur.rnance of obligations iJnposed by this. Agreement
11
1999
. Section 15. TaX Indemnification. NQtWitbStandiilg Section 14(b) above, Legent will
indemnitY and'hold hattnless· Bank from and against any and all losses, claim$,
liabilities tQ which it may become that result from any non-.fulfillinent on the part of
Legent or if:; relating to the preparation, maintenance. or transmission of infonnation
pUtSUailt to. this Agreement, the preparation and filing qf all forD;is. t9 be
filed wj.th Revenue Setyiee pUrsuant to the Internal Revenue Code, as amended; and
inciuding any additional taxes, penalties or inctnTed by Bank in connection with
non-fuUlllme.nt, and st(its, proceedingS, dema:nds, asses"smen,ts,
reasoiutble attorneys" fees and. expenses incident to any of the foregoing matters, lnclud.ing:
cO.St$,' charges.anel expenses with respect to the particip.ation of ofllcers and
employees of Bank ill: defen,se thereof Legent shall promptly reimburse Bank for all amounts
owed under this Section 15 from tiIne·to time, at Bank'sfequest, as ·such amoQllts are incurred.
(a) .as otheJ,'Wise provided in. this. 16t and'subJeet to Section 17(a.) below •. ,;
the term of this Agreement shall be two (2.) from the of this shall
COJ;ltinue' 8.JltQma:ticaUy fQr successive twelve-.Il1onth periOqS unless, ric. later than.
seventy-five (JS) da.ys before"this Agreement would otherwise -renew, either party delivers to the
. other party notice of its intention to terminate the Agreement.
(b) In the (i) a repres¢ntationor wartanty ni8(le by either party pursuant to this
Agreement (including any deposit agreement between Bank. and Legent reiating to an Account
under this Agreement) proves to have been incorrect or Qr (ii) an
undertaken by either party pursuant to this Agreement (including any deposit agreement between.
Bank and Legcnt relating to an Account 1lt1der tbjs Agreement) is not iiUfilled, resulting in a
material breach of .such representa.,tion,. warranty, or and such material breach
continues for a period of five (5) days following delivery of written notification by any other
party regarding such breach, such other party may. by deUvering a writW,n to
the breaching party, tel'n:iinate this Ag'!:eeinent effective on the thirtieth. (30th) day following the
day on which stich written termination notice is delivered, •
. (c) In the event Bank.reasonably believes that Legent is or will be I?f
meeting its obligations url.der this Agreement, or· that a Lege.n:t*s continued ownership of an
Account at Bank pre.sents unacceptable levela of reputational or compliance risk to Bank. and
Legent is 'QIla})le to proviite .8.Ssurance to Bank w:i(bin thirty days following
delivery of written notification by Bank regarding such belief that such belief is unfounded,
Bank may, by eleliveringa written notice t6 tennina,t¢ the Legent'$ Acc(,)unt
.at Bank effective on the thirtieth (30th) day following the day on which such written termination
notice is delivered. ....
(d) In the event any ruling, oPinjop. or statement issued or any detennination is made
by any governmental or regulatory authority, including a Bank Regulator, that compliance by
any party with the provisions of this Agreement would result in a violation of a law, regulaUon,
order, or poliQY C!f S)1chgovenunental or regulatory authority, the party receiving such ruling
or determination shall so notify the other parties,and the parties shall negotiate in good faith to
12
2000
modifY the Program and this on reasonable terms to· comply with such
ruling, bpmion or statement. if no. such moditi<;:ation b!!l agreed ninety (')Q) or
t.ime, any party may by delivering a written
temrlnation Q6tice·to the other this·Agreement effective on the day following
the day on which such is. 4¢livered. .
(e) In the event that J3ank exerciseS the right Section 3(h) above, (i) tegeht
may, by delivering. a written. notice to Bank, terminate ·the Agreeme.nt effective no earlier
the eighth, calen4ar 4o.y foJ1owing'Ule qayoii which the Bank stich right and (ii)Bank
shall treat such notiCe (jftetmlitation as a notice- of withdrawal .of all fundS in aU £elevant
and on sUch eighth calendar shall to be .r¢iqmed to Legerit Ulen
held by such Batik 4t the AcqQQllts by transmitting fulids to ·the relevant Settlement
Accounts.
Section 1.7. Other Provl$.iQfIS.
(a) Followiiig the of this Agreement to Section 16 hereof, the
in .this Agreement shall.survive until the Account es.tablished Bank is
closed. The'provisions 14 and IS shall stJrVive the Agreement for
one yeat after the expiration of the laSt of limitations to a claitn made against
either party to this Agreement. .
(b) 1;ach that it will use any and all information it acquires :frOnt the other
party pUrsuantto the this (the only as. contemplated
will keep all of the. Information confidentlal, and wIll caU$e 1($ employees. SubCOlitractoi'$
and to keep all oflhe Information confidential; provided however, nothing herein
shall be construed to prevent any party from making any disclosure O.f information otherwise
subject to the terms hereof (i) if any Applicable Law, (ii) to $lY .governmental
or body haVing or authority to .regulate or oversee any aspect of its
business or that of its affiliates, including a Bank Regulator, pursuant to Qr (iv) to
the or appropriate to enforQe any remedy provided for.in this Agreement .
(c) ThIs may riot be released, discharged, abandoned, changed or-modified
iIi any manner, except by an ii:l writingsigneli on of each (:if Bank and .Legent
bytheit:' duly 'authorized .representative. The f¥1ure oiany pil.rty to enforce time aily of the
provisions of this Agteementshall in no way .be construed to be a waiver of any $l,lQh provision,
nor in any way t.o affect the validity of tl)i.s Agreement or any part thet'eof or the right Qf any
party to' enforce each and every such proVision. No waiver of any btea¢hof this
Agreement shall be he.ld to be a WfliV!!lr of any other or subsequent breach. .
. (d) All notices. 9rother commu,nications required or permitted hereunder shall be in
writing and shall be deemed if (i) delivered petsonally or, (ii) .sent by overnight (lourier
service, or (iii) iftl)ailed, by registered, or certified mail (return receipt whenreceiv:ed:
(A)· if to .Le.gent, 9300 Underwood Avenue, SuiteiWO, NE, 68114, Attention: Chris
Frankei, ChiefExe.cutive Officer; (B) If to Bank) 700 17
th
Street, Sl,lite 2100, Denver, Colorado
13
2001
I
80202, Attentioil TQIIl Kientz, Chief Operatiug OfJi,cef. Bach party sball11Otif,sl the other party in
writing of.ail)' change to its address or addJ:essee. .
(e) Sach party $ball pay its tq the. iJf this
and oftJietransactiODs contemplated herein..
(t) This Agreement sballbe pemed by and construed in.lCCQtdance with of
the state ofColomd,O, without givin.$ effect to applicable;· prindip.eI of cOnfliCtS of laws.
(g) . out 'Qf,. liilder or in cOnnection with this thall be
resolved before 1heAmel'ican Arbitration Association. C<t.1orado using
A.M'$ Arl,itratiQl1 Rules fox CQIDmeici.8l or if the AAA dCtetmines· that the
RuleS for Conunercial Financial DispUteS· is inapplicable then under· the .A.AA. GQ.m,m.e.rclal
Arbitration Rules; provided,. ho:wever, thit b:t 1?1) •• tllo .. sJudl (i) be
qualified to <an> arbif;ratoi:(s) for Finpncial IndustJ;y Authority ("Ji:NRA ")
Dispute Resolution and shall be listed On its tQSte.r of approved ·'i1o.n-pubUo" _itr$t$ (as
in and (ii).b.e bQlUld by all of the followipg'oonditiOils:
(A) The arbitJ.'atot shall be prohibited from. a.'Wa'rdUlg 'any
consequential, .special, punitiv.e, lost pr.qfits. indirect, or other of ·d,at;nages
Qthe;t than direct or I¢t.ual damages; .
(13)' The arbitrator shall not award attorneys fees to anr patty;
(C) The arbitrator shall include interest on amount of dam,ages
from sucl;t it detetm.ines is appropriate; and
(0) Fot any matter in coIitrovets, less than or to the sum or
value of $100,000, (i) a single; be cb,Qsen for Qf
the 6laiDi and (ii) the. 8l'bitrator shall c)Jily have. the 'award up to
$100,000. all damases· and costs of every· kind. Subn.Ussion 'by a,ny
party b.eteto to aq:bitn.di9n with a pursuant to; the sha1l
be .a W(l.iver 'of right to recover more than S'iOO,OOo in'sum or value
from the reievant •. 'Any mattedn $100,000 sball be
'by ·a· m.ajority vQ,te of a panel oftl:iree arbitrators. .
(h) This Agreementsball be binding upon and inure to the benefit of the parties hereto
.and their successors.
. (i). 'This exeCuted in.one or mOre. counterpartS, all ofwbich sball be
oQDsidered and. 'the. same agreement, ai1.d shall become a binding agreement when or
more counterparts have been signed by of the parties and deliver«l to the otbel' party.
(j) Titles and to sections herein are inserted fbr the convenience of reference
only and are nOt intended to be a 'part of or to ·affect the meaning or' of this·
Agreement.
14
2002
(k) The Attachments to this Agreement shall be construed with and as an integral part
of this Agreement to the same extent as if the same had been set forth herein.
(1) . This Agreement incorporates and supplements the tems of the account agreement,
as amended from time to time, between Bank and Legent. In the event that any provision of this
Agreement shall be inconsistent with the account agreement or any other agreement entered into
between Legent and Bank with respect to Legent's Account, the provisions of this Agreement
shall supersede the inconsistent provision of such other agreement.
[the rest of this page intentionally left blank]
15
2003
IN WITNESS WHEREOF, the parties hereto have. executed thi$ Agreement as .of the
Effective Date ..
LEGENT CLEARING LLC
el/t
F;G..i.Jke t
Title: <z eo .
By:
Name:
Title:
16
2004
TabC
Exhibit 75 B
2006
FIRST AMENDMENT
This amendment is dated December 3, 2010 (the "Amendment") and is between Legent
Clearing ILC (the "Nominee") and United Western Bank, Denver, Colorado (the "Bank");
WHEREAS, Nominee and Bank are parties to that certain Subaccounting Agreement
made as of August 18,2010 (the "Agreement") whereby Nominee, on behalf
clients and at the direction of the Nominee's clients, directs funds at the Bank for the primary
purpose of facilitating customers' purchase' and sale of securities and other investments' and not
in a capacity of a deposit placement service; ,
WHEREAS, the Nominee and Bank seek to amend the Agreement effective iinmediately
in order to re-structure the Agreement to mittor the relationship set forth in FDIC Advisory
Opinion 05-02, dated February 3, 2005;
WHEREAS, the Nominee and Bank acknowledge that time is of the essence;
NOW THEREFORE, in consideration of the mutual promises herein contained, Nominee
and Bank agree to be legally bound by the terms of this Ac:kiendum: '
1.
The terms of this Addendum shall be deemed to supersede any and all
inconsistent terms of the Agreement. All other terms of the Agreement which are not
inconsistent with this Addendum, shaD remain in fu1l force and affect notwithstanding anything
to the contrary herein.
2. Amount of Swept Deposits at the Bank
(a)
(b)
Nominee shall use its commercially reasonable efforts to ensure that all funds
deposited at the Bank ("Swept Funds") do not exceed 10% of the total client
account assets held in client accounts at the Nominee (the "Ratio''). For purposes
of clarity, Nominee shall use commercially reasonable efforts to prevent the
average daily balance of Swept Funds during anyone month from the
Ratio, based on the average total clieJ;lt account balances held by the Nominee
, during that month (the ''Monthly Ratio"), based on the most recently available
data.
At no time shall any Swept FundS be held in time deposits.
3. Reporting
(a) Nominee, through its Chief Executive Officer or Chief Financial Officer shall
provide Bank with a written certification no later than the fifteenth (15th) day of
each calendar month confirming both the Ratio and the Monthly Ratio for the
proceeding calendar month as well as the average number of client sub-accolmts
for the proceeding calendar month represented in any omnibus account or
2007
Amendment dated December 3, 2010 by and between Legent Clearing LLC and United Western Bank, Denver, Colorado
December 3, 2010
Page 2
4. Fees
accounts maintained at the Bank for the benefit of the Nominee's clients. For the
purposes of such certification of the average number of client sub-accounts for
any calendar months shall be the number of client sub-accounts held by the
nominee as of the first and last day of each calendar month divided by a factor of
two (the .. Average Accounts"); provided, however, that the Nominee shall never
pennit more than average of 66,000 client sub-accounts to be maintained for its
clients at the Bank in any calendar month. Each monthly certification shall
acknowledge that the certification will be used by the Bankfor purposes of
reporting to the Federal Deposit Insurance Corporation and may be relied upon by
federal bank regulators during examinations of the Bank.
(a) In lieu of any other sub-accounting or similar fees due to the Nominee under the
tel'ms of the Agreement, the Bank shall pay Nominee a fee for administrative and
other services rendered as are provided for in the Agreement as set forth on
Schedule A hereto (the ("Sub-Accounting Fee"), which is an amount set forth on
a per account or per customer basis and is not calculated on the basis of funds
placed at the Bank. Schedule A is incorporated herein and made a part hereof for
all purposes by this reference.
5. Renegotiation oftha Agreement
(a) For purposes of clarity, pending the execution of any renegotiated Agreement, aU
terms of the then-current Agreement not inconsistent with Sections 2 through 4 of
this Addendum shall remain in full force and effect.
6. Miscellaneous
(a)
(b)
(c)
This Amendment may be amended or modified only in writing signed by all the
parties hereto. This Amendment shall be construed and governed by the laws of
the State of Colorado. This Amendment sets forth the entire agreement and
understanding of the parties with respect to the subject matter hereof. This
Amendment shall be binding upon and inure to the benefit of the parties hereto
and their successors and assigns. notwithstanding the foregoing, this Amendment
may not be assigned.
This Amendment may be executed in one or more counterparts and by facsimile
signature, each of which shall constitute an original and all which shan constitute
one instrument, in each case, for all purposes including admission into evidence
of the agreement of the parties.
The descriptive headings of the sections of this Amendment are for convenience
only and do not constitute part of this Amendment.
2008
A.tnendment dated December 3, 2010 by andbetween Logent Clearing lLC and United Western:Bank, Denver, Colorado
December 3, 2010
Page 3
IN WITNESS WHEREOF, with the intention to be bound by the terms of this
Addendum, the parties have executed this Addendum as of the day and year first above written
by causing their respective authorized representatives to sign where indicated below.
LEGENT CLJWUNGLLC
Title: CEO
2009
I
TabC
Exhibit 76
2011
FIRST AMENDMENT
This amendment is dated December 3, 2010 (the "Amendment") and is between United
Western Trust Company (the "Nominee") and United Western Bank, Denver, Colorado (the
"Bank");
WHEREAS. Nominee and Bank are parties to that certain Amended and Restated
. Omnibus Sub-Acc;ounting Agreement made as of April 26, 2010 (the "Agreement',) whereby
Nominee. on behalf of the Nominee's clients and at the direction of the Nominee's clients,
directs funds at the Bank for the primary purpose offacilitating customers' purchase and sale of
securities and other investments.and not in a capacity of a deposit placement seTvice;
WHEREAS, the Nominee and Bank seek to amend the Agreementeffecti.ve immediately
in order to re-structure the Agreement to mirror the relationship set forth in FDIC Advisory
Opinion 05-02, dated February 3, 200S;
WHEREAS, the Nominee BJ;ld Bank acknOWledge that time is of the essence;
NOW TImRBFORB, in consideration of the mutual promises herein contained, Nominee
and Bank agree to be legally bound by the terms oftbis Addendum: .
1. Effect of this Addendum.
The terms o f t h i ~ Addendum shall be deemed to supersede any and all
inconsistent terms of the Agreement. All other terms of the Agreement which are not·
inconsistent with this Addendum shall remain in full force and affect notwithstanding anything
to the contrary herein.
2. Amount of Swept Deposits at the Bank
(a)
(b)
NoIJiinee shall use its commercially reasonable efforts to ensure that all funds
deposited at the Bank ("Swept Funds'') do n o ~ exceed 10% of the total client
account assets held in client accounts at the Nominee (the ''Ratio''). For purposes
of clarity, Nominee shall use commercially reasonable efforts to prevent the
average daily balance of Swept Funds during anyone month from exceeding the
Ratio, based on the average total client account balances held by the Nominee
during that month· (the "Monthly Ratio''), based on the most recently available
data. .
At no . time shall any Swept Funds.be held in time deposits.
3. Reporting
(a)
Nominee, through its ChiefBxecutive Officer or Chief FinancialOfficer shall
. provide Bank with a written certification no later than the fifteenth (15th) day of
each calendar month confirming both the Ratio and the Monthly Ratio for the
proceeding calendar month as well as the average number of client sub-accounts
2012
4. Fees
(a)
for the proceeding calendar month represented in any omnibus account or
accouD.ts maintained at the Bank for the benefit of the Nom.inee's clients .. For the
putposes of such certification of the average number of client sub-accounts for
any calendar months shall be the mnnber of client sub-accounts held by the
nominee as of the :first and last day of each calendar month divided by a tactor of
two (the "Average Accounts"); provided, however,that the Nominee shall never
permit more than an average of 11,OOOc1ient sub-accounts to be maiIrtained for its
clients at the Bank in any calendar month. Each monthly certification shall
acknowledge that the certification will be used by the Bank for purposes of
reporting to the Federal Deposit Insurance Corporation and may be relied upon by
federal bank regulators during examinations of the Bank.
In lieu of any other sub-accouming or similar fees. due to the Nominee under the
terms oftb.e Agreement, the Bank shall pay Nominee a fee fOr administrative and
other services rendered as are provided for in the Agreement as. forth on
Schedule A hereto (the ("Sub-Accounting Fee"). which is an amount set forth on
a per account or per customer basis and is not calculated on the basis of funds
placed at the Bank. Schedule A is incorporated herein and made a part hereoffor
all pUIposes by this reference. .
5. Impact to RemAinder of Agreement.
(a)
For P'QIPoses of clarity, pending the execution of any renegotiated Agreement, all
terms of the then-current Agreement not inconsistent vnth Sections 2 through 4· of
this Addendum shall remain in full force and effect.
6. MiseeD'neous
(a)
(b)
(c)
This Amendment may be amended or modified only in writing signed by all the
parties hereto. This Amendment shall be construed and govemedby the laws of
the State of Colotado. This Amendment sets forth the entire agreement and
understanding of the parties with respect to the subject matter hereof. This
Amendment shall be binding upon and inure to the benefit oftb.e parties hereto
and their successors and assigns, notwithstanding the foregoing, this Amendment
may not be assigned .
. This Amendment ~ y be executed in one or more counterparts and by facshnile
signature, each of which shall constitute an original and all which shall constitute
one instrument, in each case, for all pwposes including admission into evidence
of the agreement of the parties.
The descriptive headings of the sections of this. Amendment are for convenience
only. and do not constitute part of this Amendment.
2013
IN WITNESS WHEREOF, with the intention to be bound by the terms of this
Addendum, the parties have executed this Addendum as of the day and year first above written
by causing their respective authorized representatives to sign where indicated below.
UNITED WESTERN TRUST COMPANY
UNITED WESTEBN BANK.
By: Paul E. Maxwell
James R. Peoples
Chairman of the Board and Chief Executive Chairman of the Board and Chief Executive
Officer Officer
2014
Schedule A This is Schedule A to the Amendment made as of November 30,
2010 to the Amended and Restated Omnibus Sub-Accounting Agreement by and between United
western Trust Company and United WesternBaDkmade as of April 26, 2010.
Section 1. All capitalized terms not otherwise d.efined in this Schedule A shall
have meaning attributed to them in the Amendment.
Section 2. The monthly Sub-Accounting Fee to be paid by the Bank. to the
Nominee shall be equal to $3.00 per each of the Average Accounts in each calendar month. The
aggregate Sub-Accounting Fee due to the Nominee from the B8Dk: with respect to any calendar .
month shall be the amount determined by multiplying the number of Average Accounts times .
$3.00 (the "Aggregate Sub-Accounting Pee").
Section 3. The Aggregate Sub-Accounting Fee shall be paid by the Bank to the
Nominee in the month succeeding the calendar month for which the Aggregate Sub-Accounting
Fee is detennincd within five days of the delivery of the certification of the Average Accounts
for the calendar month in question by the Nominee to the Bank.
2015
TabC
Exhibit 76 A
2016
FIRST AMENDMENT
This amendment is dated November 30,2010 (the "Amendment") and is between United
Western Trust Company (the "Nominee" and UnitedWestem Bank, Denver, Colorado (the
"B811k"); ..
WHEREAS, Nominee and Bank are parties to that certain Amended and Restated
Omnibus Sub"Accounting Agreement made as of April 26, 2010 (the "Agreement', whereby
Nominee, on behalf of the Nominee's cnent! and at the direction of the Nominee's clients,
directs :funds at the Bank for the primary purpose offacUitating customers' purchase aDd sale of
securities and other investments and not in a capacity of a deposit placement service;
WHEREAS, file Nominee and Bank seek to amend the Agreement effective immediately
in order to re--structure the Agreement to mirror the relationship set forth in FDIC Advisory
Opinion 05-02, dated February 3, 2005;
WHEREAS, the Nominee andBanlc acknowledge that time is of the essence;
. NOW THEREFORE, in consideration Gfthe mutual pmmisesherein contained, Nominee
and Bank agree,to be legally bound by the 1erms oftbis Addendum:
1. Effect of this Addendum
The terms of this Addendum shall be deemed to supersede any and all
inconsistent terms of the AgreeDiellt AU other terms oftb.e Agreement which are not
inconsistent with this Addendum shall remain in full force and affect notwithstanding anything
to the contrary herein. .
2. Amount ofSwe,pt Deposita at the Bank
,(a)
(b)
Nominee shall use its COlIl111ercially reasonable efforts to ,ensure that aU funds
deposited at the Bank ("Swept Funds") do not exceed 1 ()OAt of the total client
account assets held in client accounts at the Nominee (the "Ratio"). For purposeS
of clarlty, Nominee shall use commetclaUy reasonable efforts to prevent the
average daily balance of Swept Funds during any, one month from exceeding the
Ratio, based on the average total client account balances held by the Nominee
during that month (the "Monthly R a t i o " ~ based on the most recently available
data. .
At no tiri1e shall any Swept Funds-be held in time deposits.
3. ;Reporting;
(8)
'Nominee, through its Chief Executive Officer or Chief Financial Officer shall
provide Bd with a written certification no latet than the fifteenth (15th).day of
each calendar month coDfinning both the Raf:i,o and the Monthly Ratio for the
proceeding calendar month as well as the average number of client sub-accounts
2017
4. EH!
(a)
for the proceedirig calendar month represented in any omnibus account or
accounts maintained at the Bank for the benefit of the Nominee's clients .. For the
purposes of such certification of the average number of client sub-accounts for
any calendar months shall be the number of client sub-accounts held by the
nominee as of the first and last day of each calendar month divided by a factor of
two (the "Average provided, however, that the Nominee shall never
permit more than an average of 10,500 client sub-accounts to be maintained for its
clients at the Bank in any calendar month. Each monthly certification shall
acknowledge that the certification wUI be used by the Bank for purposes of
reporting to the Federal Deposit Insurance Corporation and may be relied upon by
federal bank regulators during examinations of the Bank.
In lieu of any other sub-accounting or similar fees due to the Nominee under the
terms of the Agreement, the Bank shall pay Nominee a fee for administrative and
other services rendered as are provided for in the Agreement as set forth on
Schedule A hereto (the ("Sub-Accounting Fee
U
), which is an amount set forth on
a per account or per customer basis and is not calculated on the basis of funds
placed at the Bank. Schedule A is incorporated herein and made a part hereof for
all purposes by this reference.
5. Jmpact to Remainder of Agreement
(a)
For purposes of clarity, pending the execution of any renegotiated Agreement, all
terms of the Agreement not inconsistent with Sections 2 through 4 of
this Addendum shall remain in full force and effect.
6.
(a)
(b)
(c)
This Amendment may be or modified only in writing signed by all the
parties hereto. This Amendment shall be construed and govemed by the laws of
the State of Colorado. This Amendment sets forth the entire agreement and
understanding of the parties with respect to the subject matter hereof. This
Amendment shall be binding upon and inure to the benefit of the parties hereto
and their successors and assigns, notwithstanding the foregoing, this Amendment
may not be assigned.
This Amendment may be executed in one or more counterparts and by facsimile
signature, each of which shall constitute an original and all which shall constitute
one instrument, in each case, for aU purposes including admission into evidence
oithe agreement of the parties. .
The descriptive headings of the sections of this Amendment are for convenience
only and do bot constitute part of this Amendment.
2018
IN WITNESS WHEREOF, with the intention to be bound by the teons of this
Addendum, the parties have executed this Addendum as of the day and year first above written
by causing their respective authorlzedrepresentatives to sign where indicated b e l o ~ .
UNITED WESTERN TRUST COMPANY
UNITED WESTERN BANK
James R. Peoples
Chainnan of the Board and Chief Executive Chairman of the Board and Chief Executive
Officer Officer' .
2019
. Schedule A This is Schedule A to the Amendment made as of November 30
J
2010 to the Amended and Restated Omnibus Sub-Accounting Agreement by and between United
Western Trust Company and United WestemBankmade as of April 26, 2010.
Section 1. All capitalized ~ s not otherwise defined in this Schedule A shall
have meaning attributed to them in the Amendment.
Section 2. The monthly Sub·Accounting Fee to be paid by the Bank to the
Nominee shall be equal to $3.00 per each of the Average Accounts in each calendar month. The
aggregate Sub-Accounting Fee due to the Nominee from the Bank with respect to any calendar
month shall be the amount determined by multiplying the number of Average Accounts times
$3.00 (the "Aggregate Sub-Accounting Fee',).
. .
Section 3. The Aggregate Sub-Accounting Fee shall be paid by the Bank to the
Nominee in the month succeeding the calendar month for which the Aggregate Sub-Accounting
Fee is detennined within five days of the delivery of the certification of the Average Accounts
for the calendar month in question by the Nominee to the Bank.
2020
TabC
, Exhibit 76 B
2021
AMENDED AND RESTATED
. OMNIBUSSlJBACCOUNTING AGREEMENT
This Amended and Restated Omnibus SubAccounting Agreement (the "Agreement") is
made and entered into by and between United Western Bank ("Bank"). a federal savings bank,
and United Western Trust Company, a South Dakota trust company ("UWTC")(Bank and UWTC
each a "Party11 and collectively, the IIParties"), as of this 26th day of April, 2010.
WHEREAS, certain accounts maintained for customers of UWTC (the "Deposit
Account
l1
) are maintained in certain omnibus accounts at Bank. (the "Bank Accounts") for the
benefit of such customers of UWTC;
WHEREAS, the aggregate balances of the Bank Accounts are, on average, in excess of
the FDIC insurance per account limits whether they are retirement or non-retirement accounts
and represent numerous Deposit Accounts;
WHEREAS, regulations of the FDIC provide that deposit account records of an insured
fmancial institution must disclose the existence of a relationship that provides the basis for
additional insurance, and the details of that relationship must be ascertainable from the records
of a bank or the records of the depository institution;
WHEREAS, UWTC has determined that it is in the best interests ofits customers whose
funds are held in the Deposit Accounts that such funds maintained in the Bank Accounts be
insured to the fullest extent provided by law for each Deposit Account customer;
WHEREAS, UWTC h8.s determined that it is in the best interest of its customers whose
funds are held in the Deposit Accounts to avoid charges for failure to maintain minimum
balance levels in their accounts;
WHEREAS, based on UWTC's determinations as described herein, records must be
prepared regarding the status of each Deposit Account that comprises a part of each Bank
Account;
WHEREAS, Bank has determined that it is in its best interest to obtain account holder
record keeping for the Deposit Accounts from a third party;
. WHEREAS, uwtc is willing to serve as Bank's agent in providing record keeping and
certain other services with respect to the Deposit Accounts comprising the Bank Accounts; and
WHEREAS, Bank and UWTC desire to enter into this Agreement that provides for the
terms and conditions under which UWTC will provide account holder record keeping and certain
other services to Bank in connection with the Bank Accounts.
NOW, THEREFORE, in consideration of the mutual promises herein contained, from
the date of this A g r e e m ~ until tenninated pursuant to the terms herein, it is mutually agreed as
follows:
1. Bankls deposit account records shall expressly indicate that the Bank Accounts
1
2022
constitute deposits held in a custodial or trustee capacity, and that the separate interest
of the account holders of the Deposit Accounts comprising such Bank Accounts are
maintained by UWTC, as agent for Bank.
2. UWTC shall maintain separate accounting and record keeping for each Deposit
Account that has a balance in the Bank Accounts. UWTC shall be primarily
responsible for providing such accounting and record keeping services. UWTC,
on behalf of its customers, shall issue instructions to Bank, by wire transfer, cheek or
other appropriate means acceptable to uwrc and Bank, regarding 1ransactionsinvolving
. :funds in the Bank Accounts. Bank shall be eiJ.tit1ed to rely upon such instructions and
Bank shall have no liability for any act or o m i s s i ~ n hereunder while acting in good faith.
3. Bank shall provide customary banking serviCes for the Bank Accounts. It is Understood
and agreed that the Bank shall be responsible under this Agreement for the servicing of
the Bank Accounts and not for servicing the individual UWTC customer Deposit
Accounts. Bank shall furnish to UWTC on a monthly basis a bank statement for each
Bank Account as requested by UWTC. Such statements shall be mailed by Bank. or be
made available to UWTC on the third business day following the close of the period being .
reported.
4. UWTC and not the Bank is the custodian or trustee to its customers who have interests in
the Bank Accounts. Bank shall have no fiduciary or custodial obligation to any UWTC
customers who have interests in a Bank Account In particular, Bank shall have no
responsibility for any bookkeeping or record-keeping functions of UWTC on behalf
of any UWTC customers or for receipt or disposition of funds in the· Bank
Accounts; provided, however, that the Bank shall honor UWTC's written instructions
regarding disposition of the Bank Accounts.
S. UWTC shall provide account holder record keeping and certain other services for the
Deposit Accounts as follows:
(a) Accounting services provided to all Deposit Accounts; and
(b) Data processing services required for subaccounting administration of the
Bank Accounts.
6. UWTC shall fumish to .Bank by the fifth (5th) business day of each month a report
detailiq the following: .
(a) the aggregate number of Deposit Accounts (the "Subaeoounts") that (i) had
balances in the Bank Accounts as of the last business day of the preceding
month. or (ii)had activity in the Bank Accounts ciming the preceding month;
and
(b) the average daily deposit balance for the prior month maintained by UWTC at
Bank.
Such report shall be signed and certified as true and accurate by the chief financial
officer ofUWTe or his or her designate. This report shall be used to determine the fee
2
2023
Bank shall pay to UWTC for the account holder record keeping services UWTC provides
hereunder.
7. Within ten (10) business days after receipt of the monthly report referred to in Section 5
above, Bank shall pay to UWTC a monthly subaccounting fee based on the greater of:
(a) flat fee of $3.00 per recording-keeping non-zero balance account (with the
number of accounts and activity measured down. to the individual investor
level); or
(b) a 1 % annual fixed rate (prorated and paid monthly) on the average daily
deposit balances maintained by UWTC at Bank.
8. It is understood and agreed that such fee is intended to compensate UWTC for its record
keeping services in connection with the Deposit Accounts. No other fees of any nature
shall be due to UWTC from Bank for services provided hereunder. UWTC and Bank
recognize that the costs associated with providing the services contemplated by this
Agreement are likely to increase over time. Consequently, the Parties agree that UWTC
shall be entitled to request adjustments from time to time, to the subaccounting fee set
forth herein, and that Bank shall act, in good faith, in considering and negotiating any
such adjustments.
9. Bank shall have the right, but not the obligation, to make a physical audit at any time
upon reasonable requests by Bank: of UWTC's books and records relevant to the matters
covered by this Agreement to verify the accuracy of UWTC's monthly report of the
number of Deposit Accounts comprising each Bank Account,
10. Bank personnel shall be made available as may be reasonably requested, to consult with
UWTC and to assist UWTC in connection with the performance of its obligations
to this Agreement. .
11. Any amendment to this Agreement shall be valid only if in writing and signed by the
Parties. After 180 days from the date hereof, Bank and UWTC shall each have the right
'upon thirty (30) days prior written notice to the other party to terminate this Agreement
for any reason. The parties to this Agreement recognize that they are both subject to
supervision and regulations by various regulatory authorities and that compliance with
the requests of such regulatory authorities is important in order that UWTC and the Bank
retain their strong ratings and credibility with such authorities. Accordingly, UWTC
and the Bank agree to act in good faith in considering and negotiating modifications to
this
Agreement (or even terminating this Agreement if need be) in order to comply as best
they are able with any regulatory
12. Upon a breach by UWTC of any covenant or promise herein contained, Bank may
terminate this Agreement with ten (10) days prior written notice to UWTC. Upon a
breach by Bank of any covenant or promise herein contained, UWTC may
terminate this Agreement at any time upon ten (10) days prior written notice to Bank.
3
2024
13. The Bankshall.provide UWTCupon request (but no more than once a quarter) with
financial information about the Bank mcluding capital ratios to assist UWTC in
assessing the financial capacity of the Bank to hold the Bank Accounts.
14. UWTC shall indemnify and hold harmless Bank and its agents and employees from all
suits, actions or claims of any character, type, or description brought or made for or on
account of or 'occasioned by the acts of gross negligence or willful misconduct of
UWTC or its agents or employees in the execUtion of or performance oftbis con1ract. Bank'
shall indemnifY and hold harmless UWTC and its agents and employees from all suits,
actions or claims of any character, type, or descri.ption brought or made for or on account
of, or occasioned by the acts of gross negligence or willfbl misconduct of Bank or its agents
or. employees in the execution of orperfo:nnance of this contract; provided however,
that Bank shall have no liability to UWTC for any acts or omissions taken or not taken in
good faith by Bank.
1 S. This Agreement shall be govemed by the laws of the United states of America and the
applicable laws of the State of Colorado.
16. ,Any notices provided for under this Agreement shall be in writing delivered by mail, fax,
email, or overnight delivery to:
Jf1o: United Western Trust Company
700 17th Street, Suite 2100
Denver, CO 80202
Phone: (720) 956-5558
Fax: (303) 550-9020
Attention: Paul Maxwell
Email: ptnQXWSU@uwbAnk.com
IffD: United. Western Bank
700 17th Street, Suite 2100
Denver, CO 80202
, Phone: (720) 956-6548
Fax: (720) 932-3993
Attention: Tom Kientz
BmaH :TKientz@uwbank.com.
[Signature page follows.]
4
2025
The foregoing Agreem.enthas been executed as of the date and year first wrl:tten above.
UNITED WESTERN BANK

Thomas J. Coq .
UNITED WESTERN TRUST COMPANY

Paul E. Maxwell, CEO
5
2026
TabC
Exhibit 77
2027
SUBACCOUNTING SERVICES AGREEMENT
This Agreement is made and entered into by and between MATRIX CAPITAL BANK
(IIBANK"), a Federal savings bank, and Trust Management, Inc., a Texas trust company
C'TMI"), as of this /D'11. day of N \ A - ~ , 1999, to be effective as of May 31, 1997
(the "Effective Date").
WHEREAS, certain accounts maintained for customers of TMI (reDeposit Accounts")
are commingled into separate omnibus accounts (the "Bank Accounts") at B A N K ~ and
WHEREAS, the aggregate balances of the Bank Accounts are, on average. in excess of
the FDIC insurance per account limit of $100,000 and represent numerous Deposit Accounts;
and
WHEREAS, insurance regulations of the FDIC provide that deposit account records of
an insured financial institution must disclose the existence of a relationship that provides the
basis for additional insurance, and the details of that relationship must be ascertainable from
the records of a bank or the records of the depository institution; and. '
WHEREAS, the customers whose funds are held in the Deposit Accounts desire that
the funds maintained in the Bank Accounts be insured to the funest extent provided by law for
each Deposit Account customer; and
WHEREAS, the customers whose funds are held in the Deposit Accounts wish to avoid
charges for failure to maintain minimum balance levels in their accounts; and
WHEREAS, as a consequence of such customer desires, records .lDUst be prepared
regarding the status of each Deposit Account that comprises a part of each Bank Account; and
WHEREAS, BANK has determined that it is in its best interest to obtain account holder
record keeping for the Deposit Accounts from a third part¥; and . .
WHEREAS, TMI is willing to provide to BANK recordkeeping and certain other
services with respect to the Deposit Accounts comprising the Bank. Accounts; and '
WHEREAS, BANK is willing to provide a subaccounting fee for the services TMI is
willing to provide in connection with the Bank Accounts; and
WHEREAS, BANK and TMI desire to enter into an agreement that provides for the
terms and conditions under which TMI will provide account holder record keeping and certain
other services to BANK in coIUlection with the Bank Accounts.
FlNlDAL:S3l40.S 13912-OOO1S
2028
NOW, THERBFORB; in consideration of the mutual promises herein contained, it is
mutually agreed as follows:
I. BANK's deposit account records shall expressly provide that the Bank Accounts
constitute deposits held by TMI. in a custodial capacity, and that the records reflecting the
separate interests of the account holders of the Deposit Accounts comprising such Bank
Accounts are maintained by TMI. .
2. TMI shall maintain separate and record keeping for each Deposit
AccoWlf: that bas a balance in the Bank Accounts. TMI shall be primarily responsible for
providing such accounting and record keeping services.
3. Notwithstanding the services provided by TMI hereunder, it is understood and
agreed that BANK. sJJa1l be responsible at all times for maintaining and servicing of the Bank
AccowD. .
4. TMI shall provide acCount holder record keeping and certain other services for the
Deposit Accounts as follows:
(a) accounting services provided to aU Deposit Accounts; imd
(b) data processing services required for subaccounting administration of
theBank Accounts •
. 5. TMI sba11 fumish to BANK by the fifth (5th) day of each month the aggregate
number of Deposit Accounts (the "Active Accounts") that bad balances in the Bank Accounts as
of the last business day of the preceding month. Such report shall be signed and certified as 1ru.e
and accurate by the chief financial officer of TMI or his or her designate. This report shall be
used to determine the fee BANK. shall pay to TMI for the account holder record keeping services
TMI provides hereunder.
6. Within three (3) days after receipt· of the monthly report referred to in Section 5
above, BANK shall pay to TMI a monthly fee equal to $3.00 multiplied by the 'number of Active
Accounts,'as detennined by the provisions of Section 5. It is understood and agreed that such fee
is intended to cOmpensate TMI for its record keeping services in connection with the Deposit
Accounts. No other fees of any JJ.BturC:, shall be. due to TMI from BANK for services provided
hereunder.
7. BANK shall have the right, but not the obligation, to make a physical audit at any
time upon- reasonable request by the BANK. of TMI's books and records relevant to the matters
covered by this Agreement to verify the accuracy of TMPs monthly report of the number of
Deposit Accounts comprising each Bank Account.
8. BANK personnel shall be made available, as may be reasonably requested, to
consult with TMI and to assist TMI in connection with the performance of its obligations .
pursuant to this Agreement
FlNlDAL:53340.S 1S9ZZ-00015
2029
9. Subject to any notice of termination given, tbis Agreement shall be
automatically renewed for successive periods of one (1) month each (each such one (1) month
period a "Renewal Tenn") unless either party gives the other written notice of termination not
less than thirty (30) days. or in the case of February twent;y-eight (28) days, prior to the end of
the then-current Renewal Term.
10. Bither party may terminate this Agreement immediately if the other party
becomes insolvent,. is the subject of a bankruptcy filing that is not dismissed within sixty (60)
days after S\JCh filing, makes an assignment for the benefit of creditors, applies for or consents
to the appointment of a .trustee or receiver, or a trustee or receiver is. appointed for such party,
and such. proceeding is not dismissed within thirty (30) days after such appointment.
Furtbennore, this Agreement may be terminated at any time by the written consent of both
BANK. and TMl.
11. The parties to this Agreement recognize that they are both subject to supervision
and regulation by various regulatory authorities, and that compliance with the requests of such
regulatory authorities is important· in. order that TMl and the BANK. retain their strong ratings
and with such authorities. Accordingly. TMI and the BANK agree to act in good
faith in considering and negotiating modifications to this Agreement (or even terminating this
Agreement if need be) in order to comply as best they are able with any regulatoxy concerns.
12. Upon a breach by TMI of any covenant or promise herein contained, BANK
may terminate this Agreement with ten (10) days' prior written notice to TMI. Upon a breach
by BANK of any covenant or promise herein contaiDed, TMI may terminate this Agreement at
any time upon ten (10) days' prior written notice to BANK. .
13. TMI shall indemnify and hold harmless BANK and its agents and employees
from all suits. actions or claims of any character, type. or description brought or made for or
on aCcount of, or occasioned by the acts of gross negligence or willful misconduct of TMI or
its agents or employees in the execution of or performance of this contract.
2030
14. BANK shall indemJiify and hold harmless TMI and its agents and employees
from all suits, actions or claims of any chaJ:acter, type, or description brought or made for or
on account of, or occasioned by the acts of gross negligence or willful misconduct of BANK. or
its agents or employees in the execution of or performance of this contract.
MATRIX CAPITAL BANK
FlNIDAL:51140.5 13m-DOO15 .
2031
TabC
Exhibit 78
2032
~ ~ 4 . . . . a . . - ~ t
~
I
BROKER-DEALER
MONEY MARKET DEPOSIT ACCOUNT AGREEMENT
THIS BROKER-DEALER MONEY MARKET DEPOSIT ACCOUNT
AGREEMENT (this "Agreement"). dated as ofNovem.ber 18,2008. is made by and between
Deutsche Bank Trust Company Americas ("DBTCA "), New York, New York, a bank that is
chartered under the laws of the State of New York and a member ofthe.Federal Reserve System.
and Legent Clearing LLC ("participating Brokerj. a limited liability company organized
under the Jaws of the State ofDelawa:re, for the purpose of establishing a program (the
"Program") by which Participating Broker can make available to broker-dealers for which
Participating Broker acts as clearing or executing broker (sul)h .broker-dealers shall be referred to herein
as "IBDs"), under whicbtbe IBDs can offer to. their customers (customers ofmDs are referred to in
the aggregate as "Customers"). on a regular and continuous basis, accounts (the "Accounts")
that are "money market deposit accounts" ("MMDAs'", as defined in Section204.2(d)(2) of the
regulations of the Federal Reserve Board (12 C.F.R. § 204.2{d)(2», or accounts authorized by 12
U.S.c. § 1832(a) ("NOW Aecounts'j (together with MMDAs. "Aecomts',) to be maintained at
one or more "depositoIY institutions" (as defined in 12 U.S.C. §·1813(c)(I» that participate in
the Program (the "Program Banks") to be selected by bBTCA and approved by Participating
Broker. the balances of which are to be insured by the Federal Deposit Insurance Corporation
("FDIC") up to the limits available within the Program Banks and the Program.
NOW, THEREFORE, nBTCA and Participating Broker agree as follows:
SeetioB·l. Effectil1e Date. Following the execution of this Agreement. Participating
Broker and DBTCA shall implement the Program on the terms and conditions set out in this
Agreement. Implementation shall be subject to, among other things: finalizing operational
processing requirements; giving any required notice to the approprlate regulatory agency or a
stock exchange of which Participating Broker is a member; and Participating Broker entering
into a written agreement with DBTCA and each Program Bank substantially in the form of
. Appendix C to this Agrecmumt. For purposes of interpreting the tenn "finalizing operational
processing requirements," the date ~ which the Program is implemented. shall be the ''Effective
Date."
Section 1. Agent and Messenger lor Customers. PartiCipating Broker Shall act as the
exclusive oustodian and agent and "messenger" (as defined in 12 C.F.R. § 7.l 012) for its
Customers in all matters related to Accounts in the Program Banks in which its Customers have a
beneficial interest ("Beneficial Interest"). .
2033
I
'I
I
I
I
i
"-
Section 3. Records ojCustomers
l
Beneficial Interests.
(a) DBTCA, acting as agent fOl' Participating Broker, shall record the Beneficial Interest
held by each Customer in each Account maintained by or on behalf of Participating Broker at a
Program Bank as designated and detennined by Participating Broker, and shall assign to such
Beneficial Interest an identifYing number designated and maintained by Participating Broker.
Among the services OBrCA provides to Participating Broker t it shall provide the mes and data
specified in Section 8 below, which DBTCA recognizes PartiCipating Broker requires in order to
maintain its records. DBrCA warrants that such files and data shall be accurate and comlllete
for its intended purposes as if DBTCA was acting as agent and record keeper for such Beneficial
Interests to the same extent as Participating Broker hereunder. DBTCA, in connection with the
services, fUes and data it provides hereunder, shall ensure that the total principal amount
deposited on any day for the benefit of a particular Customer in an AccoWlt maintained at
Program Bank, when aggregated with the Customer's Beneficial Interest in the Account, will not
exceed an amount (the "Beneficial Interest Limitation") from time-to-time established by
Participating Broker. Participating Broker hereby establishes that the Beneficial Interest
Limitation initially will be ninety-five percent (95%) of the maximum amount ofFDlC insurance
available for a deposit a.ccount maintained by a Customer (and the parties acknowledge that
different Customers or account types, e.g., retirement accounts, have different FDIC insurance
limits), subject to modification as from time-to-time established by Participating Broker after
giving such disclosure 10, and receiving any necessary consents from,. its Customers as may be
required by law or its agreements with its Customers.
(b) Should the initial or any subsequent deposit for the benefit of a particular Customer in
an ACCOWlt maintained at a particular Program Bank potentially cause the Customer's Beneficial
Interest in such Account to exceed the Bel1eficial Interest Limitation, Participating Broker will
designate another Program Bank from the list in Schedule I. and the Customer's Beneficial
Interest shall be established in the ACCOl.1nt maintained by or on behalf of Participating Broker at
such other Program Bank under a identifying number assigned by Participating Broker until such
time as the Customer's Beneficial Interest in the Account at each Program Bank reaches the
Beneficial Interest Limitation. Again, DBTCA, in connection with the services, files and data it
provides hereunder, shall ensure that Participating Broker is able to so designate such identifYing
numbers and take the action specified herelmder accurately and completely as ifDBTCA was
taking such actions directly.
(c) Ifa deposit to the Program cannot be accepted without exceeding the
Beneficial Interest Limitation at all of the Program Banks, DBTCA will either accept the amount
in excess of the aggregate Beneficial Interest Limitations for transmittal to one or more Program
Banks. or return the excess to Participating Broker, in accordance with the Participating Brokerts
instructions pursuant to Section 13(m) below.
(d) All Beneficial Interests will be held in ACCOWlts maintained by or on behalf of
Participating Broker at Program Banks identified in the program (each such Account shall be
named: "Legent Clearing LLC as agent and custodian for the exclusive benefit of customers of
its Introducing Broker-Dealers"), as anlended from time to time. for the exclusive benefit of
Customers, and records of such Beneficial Interests will be nmintained by PartiCipating Broker
(and DBTCA shall maintain records and provide to Participating Broker on a timely basis all
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such accurate and complete services, files and data as shall be needed for Participating Broker to
satisfy its obligation hereunder). Before instructing DBTCA to maintain a Beneficial Interest on
behalf of any Customer in an Account, and thereafter so long as Pa.rticipating Broker is
participating in the Program,. Participating Broker shall submit to DBTCA documentation and
information that DBrCA deems reasonably satisfactory: .
(i) to identify and designate those persons authorized by Participating
to instruct DBrCA to effect transactions in the Settlement Account (as defined in SectiOll
13(a)(iii) below) and the Accounts; and
(li) to provide such information about Customers as DBrCA may reasonably
require (consistent with what is permitted by applicable rules and regulations).
Subject to and in accordance with the terms and conditions of this Agreement, Participating
Broker, as custodian, agent and messenger for each Customer, shall deliver to the Settlement
Account its Customers' funds for deposit to the Accounts. DBTCA as Settlement Bank and
agent (as Doted below) for Participating Broker shall accept for deposit to the Settlement
Account for deposit to the Accounts for the benefit of such Customers funds so delivered by
PartiCipating Broker pursuant to instructions provided to DBTCA. DBTCA shall be responsible
for communicating those instructions to the Program Banks.
Section 4. Terms and Conditions of/he BenefiCial Interests. Unless otherwise required
by law or regulation, DBTCA and Participating Broker agree that each Account.¢each
. Customer's Beneficial Interest in an Account and the Settlement Account shall be governed by
the following tenns and conditions (and DBTCA as Program sponsor shall assure that each
agreement with each Program Bank also provides that):
(a) there shall be no minimum initial deposit for any Account, the Settlement
AccoUnt or anY"Beneficial Interest in an Account, except as may be established by Participating
Broker for its respective accounts; .
(b) interest shall be payable as provided in Section S; provided. however, that nO
interest shall be paid except as allowed by law and as stated in the specific deposit agreement;
(c) there shall be no maturity on any ACCO\Ult or the Settlement
(d) each program Bank reserves the right to require seven (7) days prior notice of any
withdrawal of funds :from an Account" in accordance with applicable laws and regulations,
including without limitation regulations of the Federal Reserve Board in 12 C.F.R. § 204.2(d)(2);
( e) there is no restriction on the amount or number of any additional deposits to an
Account on behalf of any Customer, but there shall not be more than one transaction (i.e., either
a"deposit or withdrawal) made to or from any Account on any Business Day;
(1) no Customer may transfer a Beneficial Interest in an Account to any other person
except by operation oflaw;
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(g) no transfers from an Account shall be pennitted; provided, however, that
withdrawals shall be permitted in accordance with Section 7 below;
(h) The Settlement Account shall be subject to any and an terms and conditions as
may from time to time be imposed on such account by applicable law, regulation (including but
not limited to 12 C.F.R. 204) or rule or by any other detennination of any govemmentalor
regulatory authority and DBTCA a ~ e e s that (1) all deposits of funds into the Settlement
Account belong to Customers and Wlll be kept separate from all other accounts of any nature
whatsoever maintained by the Settlement Bank for Participating Broker or any thil'd party. and
(2) the Settlement Bank will not subject any amounts in the Settlement Account to any right, .
charge, security interest.nen or claim of any kind in favor of the Settlement Bank or any person
claiming through the Settlement Bank;
(i) before any Custol!ler may participate in the Program, such Customer must provide
the related tax status, social security number or tax identification n'llmber and such other
information (or any certificates of exemption therefrom) as may be required by the Intemal
Revenue Service relating to interest bearing accounts; and if any Customer fails to provide such
information. Participating Broker shall have made provisions fox back-up withholding; and
G) the Settlement Bank shall not transfer funds from an Account to itself, nor shall it
permit DBTCA or its agent to transfer funds from an ACColmt to itself except fur transfers to an
Operating Account for the payment of fees to DBTCA and Participating Broker as agreed herein.
Section 5. In/eyest Rate.
(a) Interest shall begin to accrue on funds deposited on behalfofa Customer to an
Account on the day on which such funds are credited to the Account at the Program Bank and
shall accrue up to. but not including, the day on which funds are withdrawn from that Account
on behalf of the Customer.
(b) With respect to each A c c o ~ interest shall accrue daily as simple interest and be
credited to the principal balance of the Account monthly. at which time it shall accrue simple
interest. Similarly, with respect to each Beneficial Interest in an Account, interest shall accrue
daily as simple interest and be credited to the principal balance of the Beneficial Interest
monthly, at which time it shall accrue simple interest.
(c) DBTCA, as agent for the Pl'ogram Bank, shall compute the accrual and crediting
ofinterest on the Accounts to be paid by the Program. Bank. Participating Broker (with the
computational assistance ofDBTCA) shall compute and reflect the accrual and crediting of
interest with respect to the Customers' Beneficial Interests .
. (d) Schedule II of ills Agreement sets forth the method for calculating the monthly
amount (the "Maximum Bank Payment") payable by each Program Bank in interest to
Customers and fees to DBTCA. The "Maximum Rate", as that tenn is defined in Schedule II,
will establish as of the first b\iSiness day of each month and be applied starting on the third
business day· oftlie month. The· interest rate payable to Customers holding Beneficial Interests in
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an Account in a month will be equal to the Maximum Bank. Payment less the "DBTCA Fee". as
that tenn is defined in Schedule IT.
(e) As set forth in Schedule II, Participating Broker may elect to reduce its fees in its
sole discretion for any reason and for any period of time. including differentially in a manner that
will result in differing levels ofin!erest payable to different groups of Customers (each, a
''Tier''), based on criteria to be reasonably determined by Participating Broker or IBDs.
Panicipating Broker must be able (and has the sole responsibility) to provide a reasonable and
objectively determinable means by which DBTCA can appropriately assign Tiers to Customers.
Within these limitations, the criteria for determining Tiers may be based upon an aggregation of
relationships of Customers who are members ofilie same household. Participating Broker may
change its relative waivers with respect to one or more Tiers at any time during the tenn of this
Agreement by giving written notice toDBTCA in with Section 19(c) herein not less
tban three (3) Business Days prior to the effective date of such reset. .
Section 6. Method of Delivery of Transaction Informationfor the BenefiCial Interests.
Participating Broker as custodian, agent and messenger for Customers. mayan any Business Day
cause transaction information about funds to be deposited to or withdrawn from the Program to
be transmitted to Program Banks via DBTCA as a qualified intermediary bank in adherence with
Schedule V. ForpuI:poses of this Agreement, a "Business Day" shall mean any day on which the
Federal Reserve Wire Transfer System is open for business.
Section 7. Method of Delivery of Funds to Q'I1d From the Accounts. On each Business
Day. after DBTCA and Participating Broker have performed their obligations under paragraphs 1
through 5 of Schedule V. to ascertain and confirm the amounts of deposits and withdrawals to or
from the Program on behalf of Customers, Participating Broker shall take the following actions
in the manner set forth in paragraph 6 of Schedule V: (i) to the extent there is a net withdrawal
amolult, cause the Settlement Bank to initiate a funds transfer of the amount to
Participating Broker (or to an inteIDlediary approved by Participating Broker); and (11) to the
extent there is a net deposit amount, initiate a same-day funds transfer, of the amount, either
directly or through an intennediary approved by Participating Broker, into the Settlement
Account. all in accordance with Section 6 and Schedule V hereto.
(a) . If a same-day transfer (together with any instructions) is sent by or to the
Settlement Bank prior to the closing of the Federal Reserve wire system on any Business Day. (i)
any funds deposited by such transfer shall be deposited in Accounts at Program Banks and (ii)
any funds withdrawn shall be withdrawn from Accounts at Program all in accordance
with instructions received from Participating Broker pursuant to Section 6 and Schedule V
hereto, and such deposits or withdrawals shall be credited or debited, respectively, by
Pal1icipating Broker to the applicable Customer's Beneficial Interests in sucb. Accounts on the
records maintfJ.ined by Participating Broker on such Business Day; DBTCA shall also maintain
an accurate copy of such records and transactions as if it is Participating Broker hereunder.
Funds received after the closing of the Federal Reserve wire system will be credited on the
following Business Day.
(b) No more than one deposit or withdrawal shall be made on anyone Business Day
to or from any Account at a Program Bank or to or from the Beneficial Interest of a Customer
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with respect to a particUlar Program Bank on the records maintained by Participating Broker (and
DBTCA).
(c) Subject to the right of a Program. Bank, pursuant to 12 C.F.R. § 204.2{d)(2). to
require at least seven (7) days' written notice prior to a withdrawal or transfer of any funds in the
Aecount. Participating Broker reserves the right to withdraw from the Program any Customer's
funds in. any amount up to the remaining balance olthe Customer's Beneficial Interest from such
AcCount or Accounts as the Participatill& Broker may specify, which DBTCA promptly shall
cause to be paid from the Account or Accounts, as appropriate, together with all acCrued and
unpaid interest at the time of the withdrawal. in accordance with instructions received from
Participating Broker pursuant to Section 6 and Schedule V hereto.
(d) Where a particular Customer maintains a Beneficial Interest in an Account at two
(2) or more Program Banks, DBTCA shall recommend to Participating Broker the Account or
Accounts from which a particular withdrawal will be made, and Participating Broker will either
accept, reject or request modification to such recommendation within the time specified in
Schedule V hereto.
(e) If a Customer has properly followed the procedures to deposit funds in or
withdraw t\J.nds from a Program Bank but the funds are not credited to the Beneficiallnterest of
the Customer in an Account or Accounts at the Program Bank: or Participating Broker in
accordance with Section 7(a), then one or more of the Program Bank, Participating Broker,
DBTCA. and the Settlement Bank may be liable, in accordance with the Indemnification
provisions in Section 16 below, to the Customer for interest. other expenses and direct losses,
. depending upml the circumstances SUlTOunding the:failute of the Customer's Beneficial Interest
to be timely creditecl .
(f) If a Customer desires to transfer a Beneficial Interest in an Account at a Program
Bank to a MMDA directly on the boob of such Program Bank, and the Program Bank opens
such MMDA for the Customer. Participating Broker may withdraw the Customer's funds from
the· Account at such Program Bank pursuant to the provisions of paragraph (c) above and make
any mangements as are agreed upon with the Customer and the Program Bank to transmit all or
part of the proceeds of such withdrawal to the MMDA at such Program Bank, provided that
DBTCA shall have no responsibility for blocking further deposits under the Program to an
Account maintained at such Program Bank unless and until the Customer properly follows the
procedures in Section 13(k) below to notifY DBTCA to exclude such Program Bank.
Section 8. Information to be Prepared and Maintained by DBTCAfor Participating
Broker. On each Business Day on which any deposit to. or withdrawal from, an Account on
behalf of the Customer is made, DBTCA shall prepare and transmit to Participating Broker. as
the basis for such deposit or withdrawal, the following infonnation in machine readable form or
in the form of a computer printout. all wammted to be accurate and sufficient to enable
Participating Broker to maintain its own books and records and reconciliation regarding
Customers' Beneficial Interests in Accounts.
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· (a) A list Of all the Accounts in which Customers maintam a Beneficialln1erest, each
such Beneficial Interest designated by the appropriate identifying numbers, in which deposits are
being made on such day, together with the amount of the deposit to each such Beneficial Interest;
(b) A list of all the Accounts in which Cuslo*s maintain a Beneficial Interest. each
such Beneficial Interest designated by the appropriate identifying nwnbers, from which
withdrawals are being made on such day, together with the amount of the withdrawal from each
such Beneficial Interest;
(c) A list of all the Accounts in which Customers maintain a Beneficial Interest each
such Beneficial Interest designated by the appropriate identifying numbers, indicating for each
Beneficial Interest the balance (including accrued interest) in each such Beneficial Interest on
such day after the deposits and withdrawals set forth on the lists described in (a) and (b) of this
Section 8, have been effected. The balance infonnation will be made available within one hour
after the time by which the remaining infonnation must be provided pursuant to the preceding
parasraphs. This information shall be sufficient to enable Participating Broker to include in the
periodic statement to each Customer participating in the Program., and on any website that
Participating Broker chooses to make avsilable to Customer. the amopnt of such Customer's
Beneficial Interest in each Account maintained at a Program Bank.
(d) A list of all the Accounts in which Customers maintained any Excess Beneficial
Interest (as defined below) or any amounts known not to be covered by FDIC Insurance for any
reason.
(e) In addition, DBTCA shall provide to Participating Broker in a form mutually
agreed by DBTCA and Participating Broker by the same time that the balance information is dUe
pursuant to paragraph (b) above on the second Business Day of each calendar month the
following information for inclusion on the monthly statements to each Customer for the prior
calendar month, in each ease identifYing each such Customer by the Customer's account number
or other identifier, such as taxpayer identification number, reasonably specified by Participating
Broker: (i) The listing of each Program Bank (including addresses) at which the Customer's
funds were held as of the end of the month and the amount so held; (ii) the total 8IUOlDlt held in
the Program at the end oftbe month (the sum of the amounts proVided pursuant to clause (i»;
and (iii) the dollar amount of interest earned by each Customer in the Program during the month.
Section 9. Fees of the Parties .. The fees payable to DBTCA and Participating Broker for
services rendered are set forth in Schedule n. No Program Bank shall have any obligation to·
Participating Broker, nor shall Participating Broker have any obligation to any Program Bank, to
pay such person a fee or commission in connection with the Program. or tbetransactions
contemplated· thereunder.
Section 10. Delegation of Ruponsibilitte.s by DBTCA.. DBTCA is authorized to
delegate some or all of its responsibilities under this Agreement to one or more a g ~ t s of its
choosing; provided that any successor to DBTCA as Settlement Bank. as depository for the
Settlement Account, or as commUnications agent for Participating Broker. must be a subsidiary
of a "financial holding company'1. as that term is defined in 12 C.F.R. § 225.81; give the
representations in Section 13(a), (b). (c). (d) and (f) of this Agreement, substituting its name for
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that of DBTCA; and be a bank that has assets of not less than $25 billion and that is rated
investment grade by at least two of the nationally recognized statistical rating organizations and
that has shareholder's equity of at least Sl billion. Participating Broker acknowledges that. nom.
the implementation of the DBTCA intends to delegate those responsibilities Under this
, Agl-eement, other than its responsibilities as Settlement Baiik:, as depository for the Settlement
Account, as Communications agent for Participating Broker, and responsibilities that otherwise
cannot be delegated wi1bout violating any regulatory guidance. to Total Bank Solutions, LLC
("TBS"), a limited liability company established undertbe laws of the State of New Jersey A
copy of any notice to be sent to DBTCA in any role other than that of Settling Bank, as
depository for the Settlement Account, as communications agent for Participating Broker or any
role that otherwise cannot be delegated without violating any regulatory guidance, should be sent
to 1'8S or to such other agent as DBTCA may appoint from time to time with written notice to
Participating Broker. Except as set out in Section 18 oftbis Agreement, no delegation under this
Section) 0 shall relieve DBTCA of any of its obligations under this Agreement
Section lL Representations and Warranties by DBTCA. A:I. an inducement to enter into
this Agreement. DBTCA represents and warrants to Participating Broker now, and at the time of
opening each Account and Beneficiallnterest therein under this Agreement and during the entite
term of this Agreement, the following:
(a) DBTCA is a bank. duly validly existing and in good standing Wlder the
laws of the State of New York. the deposits of which are insured by the FDlCs and wbich is a
member of the Federal Reserve System, has assets of at least $25 billion, is rated investment
grade by at least two. of the nationally recognized statistical rating organizations, and has
shareholder's equity ofat least $1 billion. The execution, delivery and perfonnance of this
Agreement by DBTCA have been authorized and approved by aU requisite action on the part of
DBTCA, and neither the execution nor the delivery of this Agreement nor the consummation of
the transactions. contemplated hereby nor the, compliance with nor fulfillment of the terms 'and
provisions of this Agreement. will (i):conflict with or result in a breach of terms, conditions or
provisions of, or constitute a default under, the Articles oflncorporation or Bylaws ofDBTCA,
(ii).materiallY conflict with or result in a material breach of the terms, conditions or provisions,
or constitute a material default under. any material instrwnent, agreement, mortgage.jud&ment,
order. awatd, decree or other restriction to which it is a party or by which it is bO\Uld. (iii)
require, to the best of the knowledge ofDBTCA. any affinnative approval, consent.
authorization, or other order or action of any court. governmental authority or regulatory body or
of any creditorofDBTCA. or (iv) tesult, to. the best of the knowledge ofDBTCA, in the
violation by DBTCA of any applicable law. regulation or rule.
(b) This Agreement has been duly authorized. executed and delivered. by DBTCA and
constitutes a legal, valid and binding obligation ofDBTCA, enforceable against DBTCA in
accordance with its terms, as may be limited by bankruptcy laws and other s.imilar laws
affecting the rights of creditors generally Bod, principles of equity. DBTCA has full power and
authority to do and perform all acts contemplated by this Agreement.
(c) ,DBTCA and any agent to which DBTCA delegates responsibilities under this
Agreement has the systems. management and experience to fully satisfy the standards for safe
and sound operations as set forth in the FFIEC Information Systems Examination Handbook.
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(d) No registration of the Accounts or Beneficial the Program. and interests
therein is required under the Securities Act of 1933. as amended (the "'1933 Act"). or the
securities laws of any State in which Participating Broker or a Customer may be located. in
connection with the activiti.es or tranSaCtions contemplated by this Agreement. and there is no
State that prohibits the Program ftom being lawfully offered to Customers in that State without
any notice, filing other requirement, or such notices, filings and other requirements have been
satisfied.
(e) The Program as set forth herein does not cteate any investment company that
mtlSt be registered lmder the Investment Company Act of 1940, as amended (the "1940 Act'').
(f) Each Program Bank isa depository institution duly organized and validly existing
under the appropriate! laws of the United States or a State thereof. and is a "bank" or "savings
and loan association" within the meaning of Section 3(a){2) or 3(aXS) of the 1933 Act,
respectively, and is an insured bank within the meaning of 12 U.S.C. § 1813(h).
(g) Each Program Bank has been selected for inclusion in the Program by DBTCA
after having perfonned such due diligence as DBTCA determines to be co:mmercially reasonable
and necessary. DBTCA believes each Bank to be suitable for the Program. DBTCA
shall monitor the financial health and regulatory status of each Program Bank on an ongOing
basis, and shall immediately discontitlue the use of any Program Bank in the Program and notify
Participating Broker ifDBTCA deteImines that a Program Bank's fmancial health or regulatory
status makes sucb Program Bank no longer suitable for the On a quarterly basis.
DBTCA will meet with Participating Broker or provide Participating Broker with a report
describing the status of each Program Bank. For purposes oftbis Section 11 (t), a ProgIam. Bank
shall not be suitable for inclusion in the Program in the event that the Program Bank bas
insufficient capital or is otherwise ineligible under the regulations of the Federal Deposit
Insurance Corporation from receiving brokered deposits. .
(b) DBTCA will implement appropriate measures designed to meet the objectives of
the "Interagency Guidelines Establishing Information Secudty Standards" (12 C.F.R. Part 208,
Appendix 0-2). as such guidelines may be revised from time to time.
Section 12. Representations and Warranties of Participating Broker. As an inducement
to enter into this Agreement, Participating Broker makes the representations and warranties to
DBTCAin Scbedule IV and as follows, now, and at the time of opening any Account or
Beneficiallnterest therein under this Agreement for the benefit of a Customer the following:
(a) The exectltion, delivery and perfonnance of this Agreement by Participating
Broker have been authorized and approved by all requisite action on the part of Participating
Broker. and neither the execution nor the delivery of this Agreement northe consummation of
the transactions contemplated bereby nor the compliance with nor fulfillment of the terms and
provisions of this Agreement, will (i) conflict with or result in a breach of tenns, conditions or
provisions of, or constitute a default under, the organizational and governing documents of
Participating Broker, (ii) materially conflict with or result in a material breach of the tenns,
conditions or provisions, or constitute a tqaterial default under, any material instrument,
agret;'mem, mOligage, judgment, order. award. decree or other resbiction to which it is a party or
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by which it is bound, (iii) require, to the best of the knowledge of Participating Broker, any
affirmative approval, consent, authorization, or other order or action of any court. governmental
authority or regulatory body or of any creditor ofParticipating Broker. except as may be required
. by the Financial Industry Regulatory Authority. Inc. ("FlNRA"). or (iv) result, to the best of the
knowledge ofPamcipating Broker; in the violation by Participating Broker of 811Y applicable
law, or rule; provided that ifParticipa1iDg Broker is required by any securities industry
self..regulatory organization ("SRO") to give notice of its participation in the Program, such
notice bas been given, in proper form, no objection has been raised that has not been
satisfactorily resolved, and any waiting period for such prior notice shall have elapsed.
(b) 'Ibis Agreement bas been duly authorized. executed and delivered by
Participating Broker and constitutes a legal, valid and binding obligation of Participating Broker,
enforceable against Participating Broker in accordance with its teIms, except as may be limited
by bankruptcy laws and other similar laws affecting the rights of creditors generally and,
principles of equity. Participating Broker has full power and authority to do and perform. all acts
contemplated by this Agreement.
(c) Participating Broker is, and shaD continue to be during the tenn of this
Agreement, a securities broker-dea1er registered with the Securities and Exchange Commission
("SEC") and a member of FINRA.
(d) Participating Broker has the written systems. IDaI18.,8ement ana
experience to fulfill all of its obligations under the provisions of the laws, executive orders,
sanctions and regulations administered by the Office of Foreign Assets Control. the Bank
Secrecy Act, the USA Patriot Act of2DOl and all regulations issued under those. statutes and has
not received any notice, oral or written, that it is not compliant with such laws. Participating·
Brok.er acknowledges that it is a ''financial institution" as defined by the Bank. Secrecy Act and
subject to the anti-money laundering compliance program requirements of 31 U.S.C. § 5318(h).
(e) Participating Broker's performance ofits obligations pursuant to Section 13 of
this Agreement will not conflict with or result in a breach of allY privacy policy adopted by
Broker.
(f) Participating Broker has full power and authority to cmry out each Customer's
directions with respect to transmitting the Customer's funds to DBTCA as Settlement Bank for
deposit into an Account and to pennit DBTCA as Settlement Bank. to receive funds to be
withdrawn out of an Account for transmittal to Participating Broker.
(g) With respect to each Customer, to the best knowledge of Participating Broker:
___ __ --------------
.------.----. identifying information is accurate, the CustomerwiU have executed all documents necessary in
order for the Customer to participate in the Program.
. (h) Each person listed as an Authorized Person on Schedule III to this Agreement (as
such Schedule may be amended or updated from time to time by Participating Broker) has the
authority to bind Participating Broker in. with actions under tI;1e Program.
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Section 13. Agreements of Participating Broker. Participating Broker agrees as follows:
(a) To provide each Customer with a description of the terms and conditions of the
Program, including the Accounts and Beneficial Interests therein, as defined by the Participating
Broker and nBTCA prior to or simultaneously with the delivery by nBTCA or Participating
Broker of notification of the initial deposit of such Customerts funds in an Account.
Participating Broker may amend the Descriptions from time to time subject to prior consent by
OBrCA, which such consent Shallllot be unreasonably withheld. The Descriptions shall include
the following disclosures:
(i) Participating Broker will act as exclusive custodian and agent with respect
to all transactions related to the Customerts Beneficial Interest in any Account under the
Program;
(ii) Unless required by law, no Program Bank will accept any instructions
concerning the Customer's Beneficial Interest in an Account under the Program unless
such instructions are transmitted by Participating Broker or an authorized agent on behalf
of Participating Broker;
(iii) Participating Broker agrees to assume the responsibility and the risk. of
loss for any items or funds transfers of a Customer that have theretofore already been
delivered by the Customer to Participating Broker until such time as the items or funds
transfers have been received in deposit account (the "Settlement Accounf')
mamtained by Participating Broker at a designated bank (the "Settlement Bank", which
shall be DBTCA unless a110ther bank is designated by Participating Broker) for the
purpose of transmitting funds from the Accounts at the Program Banks through the
Settlement Bank to Participating and from Participating Broker through the
Settlement Bank to the Accounts at the Program Banks;
(iv) Withdrawals will be deemed paid by a particular Program Bank when
such items are transmitted by such Program Bank to the Settlement Account and that
such Program Bank will be released from all liability for such withdrawn funds once the
Program Bank delivers those funds to the Settlement Account; and
(v) The Program Banks are not responsible for the actions ofDBTCA or
Participating Broker with respect to the Program. or otherwise.
(b) The relevant lBD shall be solely responsible for determining the eligibility of
each Customer's participation in the Program and the suitability of the Program for each
Customer.
(c) To provide a periodic statement to such Customer as consistent with Participating
Broker·s policies and applicable law. Participating Broker acknowledges that Program Banks
will have no responsibility for providing any such periodic statements to Customer5 or for the
completeness or accuracy thereof.
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(d) Participating Broker will be responsible for performing any back up withholding
and for sending IRS Form 1099 interest infonnation to each customer.
(e) Participating Broker wlll at all times comply with all applicable advertising and
disclosure requirements imposed by any.appHcable law, regulation or rule. including the
provisions of Parts 204, 217. 328, and 330 of Title 12 of the Code of Federal Regulations.
Participating Broker shall distribute to Customers such infonnation, reports and data as, in the
reasonable determination ofDBTCA (including on behalf of a Program Sank), is required to be
disclosed by applicable law, regulation or rule; provided, however. Participating Broker shall
have the right to review any such distribution. Participating Broker shall also distribute such
other iIlfonnation. reports and data as Participllting Broker and DBTCA (including on behalf of a
Program. Bank) may :from time to time deem appropriate •.. h is understood that Participating
Broker may distribute such information electronically.
(f) Participating Broker will, upon reasonable request and notice, provide DBTCA
and its internal and external auditors and inspectors as DBTCA may from time to time designate,
with all reasonable assistance and with access to all personnel, premises, systems, data and other
information and records (including Proprietary Information, as defined in Section 19(a» relating
to the Program (including bUt not limited to Participating Broker's compliance with this
Agreement), but excluding woJk papers, attorney-client material. and other information that may
be regarded as privileged or a 1rade secret, at aU locations Broker or its agents
where the foregoing are located, but only for the purposes of internal and external audit and
subject to DBTCA's obligations regarding Customer Confidential Information (defined fOt"
purposes of this Agreement as all Customer records provided to and/or maintained by DBTCA,
including "nonpublic personal information" as defined in 12 C.F.R. § 216.3(n» set forth in this
Agreement.
(g) DBTCA and its internal and external auditors shall have the right to make such
copies at their own cost, as are reasonable and necessary. of any Infonnstion and other
documents permitted under (f) above, only to the eXtent they relate to the performance of
Participating Broker's obligations under the Program and this Agreement and for no other
purpose. .
(h) IfParticipating Broker receives a request for information :from the Board of
Governors of the Federal Reserve System or any Federal Reserve Bank, the FDIC, or any state
banking agency or other federal or state administrative or law enforcement agency that has
jurisdiction over DBTCA (each a "Bank Regulator"h or fromDBTCA where nBTCA has
received a request for information from a Barile Regulator the response to which requires
Participating Broker's whiCh request relates to the Program or any other obligation of
Participating Broker under this Agreement, Participating Broker shall, at DBTCA's sole cost and
expense, and to the extent required by applicable law or otherwise with the consent ofDBTCA,
provide the requesting Bank Regulator or DBTCA, as the case may be. promptly upon being
requested to do so, with· inspection and audit rights. including access to all responsive records
(including Informatioll) held by Participating access to inspect Participating Broker·s
premises, but only to the extent required pursuant to the Bank Service Company Act (12 U.S.C.
§ 1867). and all other necessary information or assistance in connection with this Agreement;
provided that nothing in this paragraph shall make DBTCA responsible for costs other than out-
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of-pocket costs that would not be incurred by Participating Broker btlt for its compliance with
such a request for information. . .
(i) The auditing and inspection rights set out in Sections 13(c), (d) and (e) of this
Agreement shall survive the termination of this Agreement for a period of two years
commencing on the end of the year in which this Agreement is terminated. Participating Broker
shall retain all relevant documentation relating to the Program for any period required by
applicable law,;
G) Participating Broker acknowledges and agrees that so long as it is participating in
the Program:
(i) In the perfonnance of its services as between one or more Program Banks
and Participating Broker, Participating Broker has primary responsibility for compliance
with the provisions of (A) the laws, executive orders, sanctions and regulations
administered by tile Office of Foreign Assets Control. (B) the Bank. Secrecy Act and the
USA Patriot Act and (C) regulations promulgated thereunder to prevent money
laundering or the financing of terrorist activities;
. (ii) Participating Broker and IBDs will establish and maintain written anti-
money laundering compliance programs that include the adoption of policies. procedures
and controls l'easonably designed to prevent ftmds in which Customers have Beneficiary
Interests, from being lIsed for money laundering or the financing of terrorist activities and
to achieve compliance with the applicable provisions of the provisions of the laws,
executive orders, sanctions and regulations administered by the Office of Foreign Assets
Control, the Bank Secrecy Act, the USA Patriot Act and any similar laws and
implementing regulations thereunder. Participating Broker shall immediate1y advise
DBTCA upon receiving any oral or written notice, or making an internal determination,
that Participating Broke.f is not in compliance with any of the foregoing statutes or
regulations, and nBTCA may then so advise each Program Bank of such n o n ~
compliance;
(iii) During such time as Participating Broker and Customers participate in the
Program, Participating Broker and lBDs shall establish, document and maintain a written
Customer Identification Program to enable it to fonn a reasonable belief that it knows the
true identity of Customers who hold Beneficiary Interests in any Account through
participation in the Program. to the extent reasOnable and practicable) and shall maintain
records of the infonnation ("CJP Information") used to verify such Customer·s identity
and to determine whether any such Customer appears on any lists of known or suspected
tenori sts or telTorist organizations provided by the appropriate government agency.
Participating Broker or IBDs, upon written request, will furnish copies of its policies and
procedures and eIP Information to DBTCA, which may in turn furnish copies to each
Program Bank at which an Account is maintained in which a Customer maintains a
Beneficial Interest. Participating Broker agrees that on the Effective Date and annually
thereafter. upon request ofDBTCA. Participating Broker will furnish to DBTCA a
certificate stating that Participating Broker is in compliance with the requirements set
forth in this Section 13, and acknowledges that DBTCA may furnish to the Program
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Banks a copy of that certificate in the form and substance of Schedule VI. Participating
Broker shall comply with the rules and regulations ofllie SEC, any states in which it is
licensed to do business. FINRA, and any securities or commodities exchange of which it
is a member with respect to its obligations described in this subparagraph (iii); and
(iv) It shall deliver to each Customer such documentation as may be required
in order for the to acknowledge and agree to the tenns and conditions
governing the Program..
(k) Participating Broker shall notify Customers of the identity of the Program Banks
in the Program eligible to receive deposits from Customers, as required and based on infonnation
received from DBTCA pursuant to Section 18(f) below. The Customer shall be responsible for
notifying Participating Broker of any Program Bank where such Customer does not want any of
its funds deposited under the Program ("Excluded Program Banks"). Participating Broker .
shall notify DBTCA in writing, file transmission, or e-mail, of the identity of any Excluded
Program Bank into which Participating Broker does not consent to receive deposits from one or
more onts Customers. Within one (1) Business Day after such notice. DBTCA shall ensure that
no new Accounts (if Participating Broker excludes the Program Bank) and Beneficial Interests
(if a Customer excludes the Program Bank) are opened for such Customers at such Excluded
Program Banks and,·within three (3) Business Days, to the extent Accounts and Beneficial
fnterests for such Customers exist within such Excluded Program Banks, shall cause the transfer
of all stIch Accounts (if Participating Broker excludes the Program Bank) alld Beneficial
Interests with respect to such Customer to another Program Bank. that is not an Excluded
Program Bank with respect to such Customer, all in accordance with instructions recommended
by DBTCA and approved by Participating Broker. (i) and (ii)
(1) Participating Broker will notify Settlement Bank promptly if it receives notice
from a Customer (in the manner anticipated by Section 14( e) below} of an unauthorized
electronic funds transfer involving the Customer's Beneficial Interest in an Account at
Settlement Bank.
(m) Prior to or concurrent with the admission of each Customer into the Program.
Participating Broker shall provide DBTCA with a written election in accordance with the following three
options of how sucb Customer's Benefieial Interest shall be treated with respect to the Program in the
event the Customer's Beneficial Interest cannot be placed in the Program within the Beneficial Interest
Limitation (such excess amount, the "Excess Beneficial Interest").
(i) If the Customer's Excess Beneficial Interest is to be placed ill the
Program regardless of the Beneficial Interest Limitation, Participating Broker shall (A) provide
prior notice, in form and substance to be agreed by Participating Broker and DBTCA, to such
Customer that such Excess Beneficial Interest may not be entitled to the full benefits of the
Program. including FDIC insurance, and (8) provide in the written election to DBTCA directions
indicating whether DBTCA should (1) place the Excess Beneficial Interest with a ·specific
Program Bank or (2) pro rate the Excess Beneficial hlterest equally among all Program Banks
that agree to receive such excess.
(ii) If the Customer is not to be placed in the Program, Participating Broker
and DBTCA shall not make the Program available to such Customer.
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(iiI) If the Customer's Excess Beneficial Interest. and only the Customer's
'Excess BenefieialIntere&t, is not to be placed in the Program. (A) Participating Broker and
DBTCA shan not make the Pro8rarn available with respect to suoh Excess Beneficial Interest and
(B) DBTCA shall promptly return to Partioipating Broker any such Bxcess Beneficial Jnterest
transferred to the Program by Participating Broker. . .
Section 14. Agreements of DBTCA.. DBTCA makes the agreements in Schedule IV and
as follows: .
(a) Subject to Section 18(c) and (d) of this Agreement, it shall take any and all action
at any time necessary so that, with the information to be maintained or provided pursuant to
Section 3 of this Agreement, and the procedures to be followed and information maintained or
provided by DBTCA for Participating Broker as contemplated by this Agreement. each
Customer's ownership of a Beneficial Interest in an Account will be evidenced so as to allow for
pass-through FPIC insurance, and shall also be in accordance with all applicable legal
requirementss including current laws. regulations and judicial interpretations relating to FDIC
insurance as well as Customer privacy and confidentiality.
(b) It shall immediately provide written notice to Program B ~ and Participating .
Broker upon receiving any oral or written notice that OBTCA, TBS or. other agent ofDB.TCA is
not acting in a manner consistent with safe and sound operations as set forth in the FFIEC
Information Systems Exanunation Handbook or with the objectives of the "Interagency
Guidelines Establishing Information Security Standards" (12 C.F.R. Part 208, Appendix D-2), as
such guidelines may be.revised from time to time.
(c) DBTCA's administration of the Program shall at all times meet in all material
respects the standards for b u s ~ continuity plans set out in NYSE.Ruie 446 and FINRA Rules
3510 and 3520 of the FINRA Rules and all other guidance, rules and regulations of each
Securities Regulator (as defined in sub.paragraph (d)(ii) below) respecting an FDIC·iD.sured
sweep program.
(d) OBTCA aclcnowledges and agrees that so long as Participating Broker is
participating in the Program: .
(i) DBTCA will, upon request, provide Participating Broker and its intemal
and external auditOIS and inspectors as Participating Broker may from time to time
designate. with all reasonable assistance and with access to all personnel. premises,
. systems, data and other infOIIrultion and records (including"but not limited to (i)
Customer Confidentiallnfonnation relating to the Program and (li) DBTCA's
compliance with this Agreement), at all locations ofOBTCA or its agents where the
foregoing are located. but only for the pUIposes of internal and external audit and subject
to Participating Broker's obligations regarding Customer Confldendal Infonnation set out
in this Agreeinent.· . .. • .
(ii) Participating Broker and its internal and external auditors shall have the
right to make such copies at their own cost, as are necessary, of any Customer
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Confidential Information and other documents only to the extent they relate to the
perfonnanee ofDBTCA's obligations under the Program and this Agreement only for the
pmposes of internal and external audit and subject to Participating Broker's obligatiOns
regarding Customer Confidential Information set out in this Agreement and for no other
pwpose; provided that such right shall be exercisable with respect to software and
programming related methods, trade secrets. technology, software design, copyrights tmd
patents, only as is necessary to verify the availability of FDIC insurance to Customers'
interests in the Accounts, the accuracy of the calculation of Customers' interests in the
Accounts, and to respond to any requests for information Of disclosure from the SEC,
FINRA, or any stock exchange or anY state securities regulator (each a "Securities
Regulator") thai supervises Participating Broker.
(iii) IfDBTCA or its agent receives a request for information from a Securities
Regulator, or ti'om Participating Broker where Participating Broker has received a request
for information from a Securities Regulator the response to which requires DBTCA's
assistance, which relates to the Program. or any other obligation oiDBTCA under this
Agreement, DBTCA sball, at Participating Broker·s sole cost and expense, provide the
requesting Securities Regulator, OX" Participating Broker, promptly upon being reque$18d
to do so, with inspection and audit rights at all times, including access to all recOrds
(including Confidential. Informatjon) held by DBTCA or its agent, access to inspect the
premises ofDBTCA or its agent, and all other necessary information in connection with
this Agreement and.its performance, as required by applicable law or otherwise with the
consent of Participating Broker; provided that nothing in the paragraph shall make.
Participating Broker responsible for costs other than out-of-pocket costs that would not
be incurred by DBTCA but for its compliance with such a request for wOrmation.
(iv) The auditing and inspection rights shall survive the tmn of this
Agreement for a period of two years commencing on the end of the year in which this
Agreement is terminated. DBTCA shall retain aU relevant docurnentationrelating to the
Program for any period required by applicable law.
(e) DBTCA agrees that for pwposes of Section 205.6 of the Federal Reserve Board's
Regulation B (12 C.F.R. § 205.6»), notice ofan Wlauthorized electronic fund transfer given by a
Customer that is a "consumer", as defined in Section 205.2 of that regulation, to Participating
Broker constitutes notice to DBTCA as Settlement Bank. .
(f) DBTCA will alert Participating Broker as soon as reasonably possible after it
becomes aware of any unauthorized release of Customer Confidential Information (as defined in
Section 13(£)) and will use reasonable efforts to provide Panicipating Broker with any
information it needs to be able to comply with any obligations to provide notice ofsut:h release
to any Customer or governmental agency.
Section 15. Conditions Precedent to Establishment 0/ Benejiclallntere,ts. The
obligations ofDBTCA and Participating Broker tmder this Agreement shall be subject to the
fulfillment on or prior to the date that DBTCA accepts funds as Settlement Bank from
Participating Broker, and the continuing material compliance of all parties with the following
conditions:
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(a) The representations and warranties ofDBTCA and Participating Broker contained
in this Agreement shall be true and correct as of the date hereof and as if made at and as of the
time of each Beneficial Interest is established and otherwise throughout the term of this
Agreement. .
(b). DBTCA and Participating Broker each shall have complied with all of the tenus
of this Agreement as of the date hereof and for as long as the Agreement shall remain in effect.
(c) Neither DBTCA nor Participating Broker has received notice from any Securities
Regulator or governmental agency that the Program contemplated by this Agreement may not be
lawful or otherwise implemented with respect to Customers.
Section 16. Indemnification.
(a) DBTCA agrees to indemnify and hold harmless Participating Broker and each of
its respective members. managerst officers, directors, agents. employees and affiliates from and
against any and alliossest claims, damages or liabilities, including penalties on reserves and
including losses. claims. damages or liabilities incurred to Customers, to which it may become
subject that result from any material misrepresentation, breach of warranty. or negligent
performance by or material nonperformance of any agreement on the part ofDBTCA or any
subcontractor or .agent ofDBTCA (other than Participating Broker) under this Agreement
(regardless of whether any party approved the use of such person by DBTCA), and all suits,
actions, proceedings, demands, assessments, judgments, costs, reasonable attorneys' fees and
expenses incident to any of the foregoing matters, including those reasonable costs, charges and
expenses (including any expenses resulting from any investigation or inquiry) with respect to the
participation of officers and employees of Participating Broker in defense thereof, whether or not
Participating Broker is named as a party. DBTCA shall promptly reimburse Participating Broker
for all amounts owed under this Section 16(a) from time to time, at the written request of
Participating Broker, as such amounts are incurred.
(b) Participating Broker agrees to indemnify and hold harmless DBTCAand each of
its respective members, managers, officers, directors, agents (including TBS at such times as
TBS is suchan agent). employees and affiliates from and against any and all losses, claims,
damages or liabilities, including penalties on reserves, to which it may become subject that result
from any material misrepresentation, breach of warranty,. or negligent perfonnance by Dr
material nonperformance orany agreement on the part of, Participating Broker, its affiliates, or
any subcontractor or agent of Participating Broker (other than DBTCA and its agents) under this
Agreement (regardless of whether any party approved the use of such person by Participating
Broker), and all suits, actions, proceedings, demands. assessments.judgments. costs. reasonable
attorneys' fees and expenses incident to any of the foregoing matters, including those reasonable
costs, charges and expenses (including any e"'-penses resulting from any investigation or inquiry)
with respect to the participation of officers and employees ofDBTCA in defense thereof,
whether or not DBTCA is named as a party. Participating Broker shall promptly reimburse
nBTCA for all amounts owed under this Section 16(b) from time to time, at the written request
ofDBTCA, as such amounts are incurred.
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(c) If a claim by a third party is made against any indemnified party, and if any
indemnified party intends to seek indemnity with respect thereto under this Section 16, the
indemnified party shall promptly notify the indemnifying party of such claim. The indemnifying
party shall have thirty (30) days after receipt of the above-mentioned notice to undertake,
conduct and control. through counsel of its own choosing (subject to the consent oftha
indemnified party, such consent not to be unreasonably withheld) and at its expense, the
settlement or defense thereof, and the indemnified party shall cooperate with it in connection
therewith; provided that: (i) the indemnifying party shall not thereby permit to exist !lIly lien,
encumbrance or other adversecbarge upon any asset of any indemnified party; (ii) in the event it
appears likely, in the reasonable judgment of the indemnified party. that different defenses are
available to the indemnified party or that a conflict of interest may arise between the indemnified
party and the indemnifying party with respect to such claim, the indemnified party shall choose
its own counsel, and the reasonable fees and expenses of such counsel shall be borne by the
indemnifying party; (iii) in the event it appears that no conflict of interest will arise between the
indemnified party and the indemnifying party and the indemnified party desires to choose its
cOl.lnsel, the indemnifying party shall petmit the indemnified party to participate in such
settlement or defense through such counsel chosen by the indemnified party, provided that the
fees and expenses of such counsel shall be borne by the indemnified party; and (iv) the
indemnifying party shall agree promptly to reimburse the indemnified party for the full amount
of any loss resulting from such claim and all r e l ~ t e d expenses incurred by the indemnified party
within the limits of this Section 16. So long as the indemnifYing party is reasonably contesting
any such claim in good faith, the indemnified party shall not payor settle any such claim.
Notwithstanding the foregoing. the indemnified party shall have the right to payor settle any
such claim. provided that in such event the indemnified party shall waive any right to indemnity
therefore by the indemnifying party. If the indemnifying party does not notify the indemnified
party within thirty (30) days after receipt of the indemnified party's notice of a claim of
indemnity hereunder that it elects to undertake the defense thereof. the indemnified party shall
have the right to contest, settle or compromise the claim in the exercise of its exclusive discretion
at the expense of the indemnifying party.
(d) In no event shall any party be liable for loss of goodwill or for special, indirect,
consequential or incidental damages ariSing from such party's breach of this Agreement,
regardless of whether such claim arises in tort or ill contract. No claim may be asserted against
an indemnifying party more than one (1) year after such claim has been lawfully asserted against
an indemnified party. The provisions of this paragraph apply even though the loss or damage,
irrespective of cause or origin. results, directly or indirectly, either from performance or non-
performance of obligations imposed by this Agreement.
Section 17. Tax Indemnification.
(a) Notwithstanding Section 16(a) of this Agreement, Participating Broker will
indemnify and hold hannless DBTCA and each of its agents (including TBS at such times as
TBS is an agent) from and against any and all tax losses, claims, damages or liabilities to which
any of them may become subject that result from any non-fulfillment of any agreement on the
part of Participating Broker. or any agent of Participating Bl'Oker (except for DBTCA or its
agents). relating to the preparation, maintenance or transmission of infonnation pursuant to this
Agreement including any additional taxes, penalties or interest incurred by OBTCA or its agem
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in connection with such non-fulfillment,. and all suits, actions, proceedings, demands,
assessments.juclgments, costs, reasonable attorneys' fees and expenses incident to any of the
foregoing matters, including: reasonable costs, charges and expenses with respect to the
participation of officers and employees ofDBTCA and its agents in defense thereof. .
Participating Broker shaD promptly reimburse DBTCA or its agent for all amounts owed under
this Section 17(a) from time to time, at DBTCA's request, as such amounts are incurred.
(b) Notwithstanding Section 16(b) DBTCA will indemnify and hold harmless
Participating Broker from and against any and all tax losses, claims, damages or liabilities to
which it may become subject that result from any of any agreement on the part of
DBTCA or any agent thereof, relating to the prepatation, maintenance or transmission of
information pursuant to this Agreement including any additional taxes, penalties or interest
incurred by Participating Broker in connection with such non-fulfillment, and all suits, actions.
proceedings, demands, assessments, judgments, costs, reasonable attomeys' fees and expenses
incident to any of the foregoing matters, including: reasonable costs. charges and expenses with
respect to the participation of officers and employees of Participating Broker in defense thereof.
DBTCA shall promptly reimburse Participating Broker for all amOlDlts owed under this Section
17(b) from time to time. at Participating Broker's request, as such amounts are incurred..
Section 18. Termination and E'Kcluslvllj.
(a) This Agreement shall continue until the date that is one (1) year from the first day
of the month of the Effective Date (the "Initial Period") and will continue thereafter
automatically for successive twelve-month periods (computed from the fast day of the month of
the Effective Date (each Ii "Subseqnent Period") unless (1) no later than four (4) months before
expiration of the Initial Period or (2) no later than four (4) months before the expiration of any
Subsequent Perlod
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eitherDBTCA or Participating Broker shall deliver to the other party notice
of its intention to tenninate the Agreement, in which event the Agreement shall terminate on the
expiration of the lriitial Period or Subsequent Period.
(b) Notwithstanding the provisions of Section 18(a), in the evem a representation or
wammty made by any party pursuant to this Agreement proves to have been incorrect or
inaccum:te, or an agreement undertaken by either party pursuant to this Agreement is not
fulfilled, resulting in a material breach·of such representation. warranty t or agreement, and such
material breach continues for a period oftive (5) days following receipt of written notification by
any other party regarding such breacht such other party may, by delivering a written termination
notice to the breaching party, terminate this Agreement effective on the thirtieth (30th) day
following the day on which such original written termination notice is delivered; provided,
however, that perfonnance by anonbreaching party orany obligation under this Agreement will
be excused during any period of time that continued performance would result in a violation of
law as the result of a breach of any representation, wanantyor obligation under this Agreement
by the other party.
(c) Notwithstanding the provisions of Section 18(a), in the event that any ruling,
opinion or statement is issued or any detennination made by any governmental or regulatory
authority that the Accounts do llOt qu8lifY as MMDAs under the regulations of the Federal
Reserve Board, and, particularly. 12 C.F.R. § 204.2(dX2), the Accounts are subject to reserves as
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transaction accounts. the Customers maintaining Beneficial Interests in Accounts are not entitled
to FDIC insurance with respect to such Beneficial Interests for the maximum amount of principal
and interest pursuant to applicable laws and regulations. or' the Accounts or Beneficial Interests
therein are subject to any special reserves, the parties sIlall negotiate in good faith to modify the
Program on commeroiaUy reasonable terms to comply with such ruling, opinion or statement. If
no such modification can be agreed within a commercially reasonable time, DBTCA 01'
Participating Broker may thereafter, by delivering a written termination notice to the other party,
terminate this Agreement effective on the day fonowing the day on whiCh such written
termination notice is delivered.
(d) Notwithstanding the provisions of Section 18(a), in the event any ruling, opinion
or statement is issued or any detennina:tion is made by any govemmental or regulatory authority
that compliance by any party with the provisions of this Agreement would result in a violation of
a law, regulation, order. rule or policy of sllCh governmental or regalatory authority, or would
materially adversely effect the economics of the Program as intended and contemplated
hereunder for Participating Broker or Customers (due to any requirement for excessive
charges. reserves or otherwise). the party receiving such ruling or determination shall so notify
the other parties. and the parties shall negotiate in good faith to modifY the Program. on
commercially reasonable termS to comply with such ruling. opinion or statement If no such
modification can be agreed within a commercially reasonable time, any party may thereafter, by
delivering a written termination notice to the other parties, terminate this Agreement effective on
the day following the day on which such termination notice is delivered.
(e) During the Initial Period and each Subsequent Period, DBTCA, through the
Program, shall be the exclusive provider of a FDIC insured money market deposit account cash
sweep product to Broke.r, and Participating Broker shall not offer the availability of
a FDIC insured money nlarket depos1t account cash sweep product to Customers except through
the Program; provided however that nothing m this Agreement shall precludePamcipating
Broker from offering any :free credit program or money market fund program to
Customers.
. (f) At all times under this Agreement DBTCA shall select the Program Bank(s) in
which to open and maintain one or more Accounts in whioh Customers may own Beneficial
Interests and deteIIlllne into which Program Banks Castorners' funds should be deposited and
:from which Program Banks Customers' funds should be withdrawn, subject m each case to the
approval of and pursuant to the instructions of Participating Broker, or as modified. by a
particular Customer. Participating Broker may, at any time, propose banks to DBTCA for
inclusion in the Program as Proprietary Program Banks. that. in each case. meet criteria to be
mutually agreed by Participating Broker and DBTCA, and DBTCA shall not unreasonably
withhold its consent to such bank's inclusion in the Program. Schedule VII sets out the name
and location of each Proprietary Program Bank eligible to receive deposits from Participating
Broker, and Schedule I sets out the name and location of each other Program Bank eligible to
receive deposits from Participating Broker. each as of the date of this Agteement,and as amended
from time to time. At any time an eligible Proprietary PrOgram Bank or other Program Bank is .
added to or remOVed from the Program, DBTCA shall first qpdate Schedule VII or 1 to this
Agreement, as appropriate, and distribute the revised Schedule to Participating Broker at least 30
days in advance (or such shorter time as Participating Broker shall pennit) of actually beginning
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to recommend placing Customer Beneficial Interests in Accounts at such new Program Banks.
Participating Broker shall provide the name and location of each Proprietary Program Bank and
Program Bank identified on Schedules VII and I to each Customer before the Customer agrees to
participate in the Program and thereafter upon any modification to such Schedules. Participating
Broker may. in its sole discretion, exclude any Program Bank from participation in the Program.
(g) Notwithstanding the provisions of Section 18(a). in the event that TBS or any
subsequent agent to which DBrCA delegates responsibilities under this Agreement shall become
unable to carry out its responsibilities as agent for DBTCA with respect to the Program. nBTCA
shall make commercially reasonable efforts to identity a substitute agent to perform the
responsibilities under this Agreement or may choose to perform the responsibilities itself. In the
event that DBTCA reasonably determines that it can neither perform the responsibilities itself
nor obtain the services of another satisfactory agent to perform such responsibilities on
commercially tenns, DBTCA may tenninate the Program 011 no less than ninety (90)
days' notice and it shall bear no liability to Participating Broker for such termination.
(h) Notwithstanding the provisions of Section 18(a), in the event that DBTCA,
pursuant to Section 10 of this Agreement, delegates its responsibilities as Settlement Bank, as
depository for the Settlement Account, or as communications agent for Participating Broker
under tIus Agreement, to any other person. or delegates any ftmctions perfonned by ms to any
person other than an affiliate of DB TeA or TBS, Participating Broker may tenninate this
Agreement if it makes a good faith determination that such successor institution lacks the
competence or integrity to satisfactorily perfonn the required functions under this Agreement;
provided that: (i) such termination cannot be effective earlier than the 60th day after Participating
Broker provides written notice of such determination to OBTCA in the manner required in
Section 19(c), (ii) such written notice be provided not later than thirty (30) days folJowjng the
date upon which Participating Broker receives notice of such delegation of functions, and (iii)
such written notice must provide the basis upon which Participating Broker believes that the
successor cannot satisfactorily perfonn the reqwred functions.
Section 19. Other Provisions. Following the tem1ination of this Agreement pursuant to
Section 18(a) hereof, the agreements contained in Sections 3,5,6,7,8,9, 12(d), 13 and 14 of
this Agreement shall survive until the last Account established at a Program Bank is closed,
fonowing which time the agreements contained in Section 8 hereof shall survive for seven (7)
years. AU representations and warranties contained in Sections 1 I. 12 and 13 and the provisions·
of Section 14 of this Agreement shall survive the tennination of this Agreement. The provisions
of Sections 16. 17. and this Section 19 shall survive the termination of this Agreement for one
year after the expiration of the last statute of limitations applicable to a claim by any party to this
Agreement.
(a) Each party agrees that it and its agents will use any and all information it acquires
from any other party pursuant to the temlS of this Agreement, including Customer records and
the identity of Proprietary Program Banks provided by a Participating Broker (including
"nonpublie personal information" as defined in 17 C.F.R. § 248.3(t) and 12 C.F.R. § 216.3(n»
(collectively. the "Proprietary Information"), only as contemplated hereby, will keep all of the
Proprietary Information confidential, and will cause its agents, employees, delegates. .
subcontractors and representatives to keep all of the Information confidential; provided however,
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nothing herein shall be construed to prevent any party ftom making any disclosure of
information otherwise subject to the terms hereof if'required by any applicable law or"
regulation. to any govemmental agency or regulatory body having or claiming authority to
regulate or oversee any aspect of its business or that of its affiliates, pursuant to subpoena or to
the extent necessary or appropriate to enforce any remedy provided for in this Agreement.
(b) This Agreement may not be released. discharged, abandoned, changed or
modified in any manner, except by an instrument in writing signed on behalf of each of the
parties hereto by their duly authorized representative. The failure of any party to enforce at any
time any of the provisions of this Agreement shall in no way be construed to be a waiver of any
such provision, nor in any way to affect the validity of this Agreement or any part thereof or the
right of any party thereafter to enforce each and every such provision. No waiver of any breach
of this Agreement shall be held to be a waiver of any other or subsequent breach. .
(c) All notices or other commWlications required or permitted hereunder shaD be in
writing and shall be deemed given if delivered personally or, sent by ovemight courier service,
or if mailed by registered or certified mail (return receipt requested) when received: (l)ifto
DBTCA. 345 Park Avenue, 26th Floor, New York, NY 10154 Attention: Joseph Sarbinowski,
Managing Director, (2) TBS, 3 Plac&-Suite 320, Hackensack. NI 07601
Attention: Dennis C. Borecki, President, anct (3) if to Participating Broker, to the person
designated in Schedule IV. DBTCA and Participating Brolcel: shall each promptly notifY the
other pai"ty in writing of any change in address or contact infonnation.
(d) No party hereto shall use the name of any other ptrty hereto in any advertisement
without the prior written approval ofsucb other party. For purposes of the preceding sentence,
the term "advertisement" shall have the meaning assigned to it by Rule 2210(a) of the FINRA
R\ues. No party hereto sh8l1 issue any press release or public announcement concerning this
Agreement or the transactions contemplated hereby without the priOl' written approval of the
other party hereto, except to the extent that such party shall be obligated by law, role or .
regulation of any governmental or regulatory body. in which event such press telease or public
announcement shall ·not be made without prior consultation with. the other. party,
(e) provisions ofparagtaph (d) of this Section 19, Participating
Broker, its employees, agents and representatives, will not, Without DBTCA's prior written
consent in each instance, use in advertising, publicity or other promotional endeavor. the name of
Deutsche Bank: or any of Deutsche Bank's affiliates, or any officer or employee of Deutsche
Bank or its Affiliates, or any trade name, trademark, trade device, service mark, symbol or any
abbreviation. contmction or simulation theJ."Cofused by Deutsche Bank or its Affiliates; .
represent, directly or that any product or service provided by Participating Broker has
been approved or endorsed by Deutsche Bank (except as expressly permitted in this Agreement);
in any way refer to the existence oftbis Agreement or the relationship of the parties in press
releases, advertising or any other materiabl distributed by Participating Broker to third parties for
any pwposes whatsoever; or respond to any press inquixy about this Agreement or the Program.
In the event that nBTCA (through its coiporate marketing department) consents to any
marketing initiative, Participating Broker will comply with. all of Deutsche Bank's corporate
communications and other marketing policies, as specified by DBTCA in writing..
22
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(f) Bach party hereto shall pay its own expenses incident to the prepamtion of this
Agreement and the of the tnmsa.ctions contemplated herein.
(g) This Agreement shall be governed by and COl'lS1:rued in accordance with the laws
of the State of New York, without giving eifect to applicable principles of conflicts oflaws.
(h) . Disputes arising out of, under or in connection with this Agreement shall be
resolved before the American Arbitration Association ("AAA'") in Chicago using the AAA's
Arbitration Rules for Commercial Financial Disputes, or if the AAA determines that the Rules
for Commercial Financial Disputes is inapplicable then under the AAA Commercial Arbitration
Rules; provided, however, that in any such arbitration the ubitrator(s) shall (i) be qualified to
serve as (an)arbitrator(s) for FINRA Dispute Resolution and shall be listed on its roster of
approved arbitrators (whether "public· or "non-public", as defined in NASD rules and (ii) be
bound by all of the following conditions:
(i) The arbitrator shall be prohibited from awarding any consequential.
special, punitive. lost profits. indirect, or other form of damaaes other direct or
actual damages;
("li) The arbitrator shall not award attorneys fees to any party;
. (iiI') The arbitrator shall include reasonable interest on the amount of damages
awarded from such date as it determines is appropriate;
(iv) .. For any matter in controversy less than or equal to the sum or value of
$250,000, a single arbitrator shall be chosen for the adjudication oftbeclaim and the
arbitrator shall only have the authority to award up to $250,000, including all damages
and costs of every kind. Submission by any party hereto to arbi1tation with a single .
arbitrator pursuant to the foregoing shall be deemed a waiver of any rigbt to recover more
than $250,000 in sum. or value:from the relevant matter. Any matter in controversy
exceeding 5250,000 shall be decided by a. majority vote of a panel of three arbitrators.
(i) . Except for each party indemnified under this Agreement, this Agreement shall be
binding upon and inure solely to the benefit of the parties hereto and their permitted successors
and assigns and nothing herein, express or impUed, is intended.lO or shall confer upon any other
person, including any Customer, legal or equitable right, benefit or remedy of any nature
whatsoever under or by reason oftbis Agreement. Except as specifically provided in this
Agi-eement. neither party may assign this Agreement without the express written consent of the
other, sUch consent not to be UDIeasonablywithheld; any other attempted or purported
assignment a.bsent written consent shall be void.
G> This Agreement shall binding upon and inure to the benefit of the parties .
hereto and their successors ..
(k) This Agreement may be executed in one or more counterparts. all ofwtiicb shall
be considered one and the same agreements and shall become a binding agreement when one or
more counterparts have been signed by each of the parties and delivered to the other party.
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(1) Titles and headings to sections herein are inserted for the convenience of
reference only and are not intended to be a part of or to affect the meaning or interpretation of
this Agreement.
(m) The Schedules and Appendices to this Agreement shall be construed with and as
an integral part of this Agreement to the same extent as if the same had been set forth herein.
* * *
IN WITNESS WHEREOF, the parties hereto have executed these presents the day and
year first above written. .
DEUTSCHEBANKrRUST
COMPANY AMERICAS
By:
By:
LEGENT CLEARING LLC
B Y ~ ~ ' E ? X
Name: David Brant
Title: Co-President & CFO
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SCHEDULE I
UST OF PROGRAM BANKS
(as of Nov ember 18,2008)
Appalachian Community Bank
Bank of Hemet
Business Bank
Citizens Business Bank
Continental.Bank
Crown Bank
Darby Bank
East West Bank
Evolve Bank and Trust
Fidelity Bank
First State Bank of Rice Texas
Israel Discount Bank
Plains Capital Bank
Tamlapais Bank
United Western Bank
Vectra Bank
Zions Bank
East Ellijay, GA
Riverside, CA
Minnetonka, MN
Ontario, CA
Salt Lake City, UT
Edina, MN
Vidalia. GA
Pasadena, CA
Parkin, AR
Allen Park, MI
Rice, TX
New York, NY
Dallas, TX
San Rafael, CA
Denver, CO
Denver, CO
Salt Lake CIty; UT
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SCHEDULED·
Fee Schedule
MAXIMUM RATE
For purposes of Section Sed) of this Agreement, the "Maximum Rate" shall
be a rate equal to the Federal Funds Effective Average Rate (as defined below) plus
the Broker Spread (as defined in subsection (a) below).
(a) "Broker Spread" means an amount (positive or negative), in basis
points, equal to the Bank Spread, as calculated pursuant to subsection (b) below,
minus the DBTCA Fee, as calculated pl.lrsuant to subsection (c) below.
(b) "Bank Spread" means the amount, in basis points, equal to (x) the
maximum interest rate payable on the Accounts by the relevant Program Bank in a
given month minus (y) the Federal Funds Effective Average Rate as of the first
Business Day of such month. . ,j .
F b
.
(c) "DBTCA ee" means an amoUllt, in aslS points, equal to (x III
basis points plus (y) Bank Spread to the extent that the Bank Spread (vJ
exceeds twenty (20) basIS pOlnts. .'
Cd) "Federal Funds Effective Average Rate" means the rate (expressed
as a percentage per annum rounded upwards, ifnecessary. to the nearest one-
hundredth (1/100) of one percent (0.01 %» for deposits in U.S. Dollars most
recently published on the website Board of Governors of the Federal Reserve
Systema1:
http://www.federalreserve.gov/releaseslh15/datalMonthlYIH15_FF_O.txt
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SCHEDULEll
AUTHORIZED REPRESENTATIVES
DavldBrant
Jean Luther
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SCHEDULE IV
REPRESENTATIONS AND WARRANTIES AND AGREEMENTS
SECTION 12
Participating BToker is a corporation duly organized. validly existing and in. good
standing under the laws of the State of Delaware.
NOTICES
For purposes of Section 19(c). aU notices or other communications shall be deemed
given to Participating Broker if(l) delivered personally or. (2) sent by overnight
courier service. or (3) if mailed by registered or certified mail (return receipt
requested) to the following:
Legent Clearing LLC
Attn: Compliance Department
9300 Underwood Ave,
Omaha, NE. 68114
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SCHEDULE V
DEPOSIT PROCESSING SCHEDULE
PURSUANT TO SECTION 6 OF THE AORBEMBNT
(ALL TIMES ARB CENTRAL TIME)
1. Prior to 1 :30 P.M. (and preferably no later than 1 P.M.), on any
Business Day. Participating Broker shall deliver to DBTCA. pursuant to
instructions to be provided by DBTCA, the following data: brokerage account
registration, brokerage account ownership type Qoint, individual, cozporate, etc.),
taxpayer identification number(s), account number at Participating Broker.
,information sufficient to identifY the correspondent institution from which the
account was sourced, and amount of deposit and/or withdrawal for each Customer
. participating in the Program for which a deposit and/or withdrawal will be made
that day. Such delivery shall be made first, in machjne readable fmmat, followed
by a confirmation sent by e-mail of the net amotlDt to be deposited or withdrawn
that Business Day; iftbe method for delivery in machine readable format is not
available, all of the foregoing shall be sent bye-mail, and ifneither machine
readable format nor email is available, ,by manual entry into the deposit servicing
system of DBTCA or its designated agent.
2. Within forty-five (45) minutes after recelvingtheinfonnation
referred to in the previous paragraph in machine-readable format, or within a
reasonable time after receiving the infonnation in another format. DBTCA shall
analyze the activity data and the balances in the Account in each Program Bank
and in the Settlement Account, and deliver to Participating Broker by 11le or e-mail
the recommended moven1ent of assets to or from Accounts maintained at each
Program Bank.
3. Within thirty (30) minutes after receiving the information referred to
in the previous paragraph, Participating Broker shall review and conium such
infonnatiQn, and detennine whether it approves, disapproves or requires
nlodification thereof;, Participating Broker shall then respond to DBTCA via the
same method of delivery (file or e-mail), either approving. disapproving or
requesting modification of the recommended movements of assets to or from each
Program Bank.
4. Immediately upon receiving the approval or modification
instructions from Participating Broker pursuant to the previous paragraph, OSTCA
shall notify tho Program Banks of the amounts to be deposited to or withdrawn
from the Accounts.
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5. Within fifteen (15) minutes after receiving the infomation referred
to in paragraph 3 above, DBTCA will prepare instructions for the transfer in same-
day funds from the Settlement Account to the Accounts at the Program Banks for a
net deposit, or for the transfer in same-day funds from the Program Banks to the
Settlement Account for a net withdrawal, and provide a copy of such instructiol1s to
Participating Broker.
6.
(a) On the smne Banking Day on which it receives the instructions referred
to in paragraph 5 above, Participating Broker shall deliver to Settlement
Bank same.day funds in the amount of any net deposit by 4:30 P.M., or
shall authorize the delivery from Program Banks to Settlement Bank by
3:15 P.M. of same-day funds in the amount of any net withdrawal;
(b) By 4:30 p.m. on the same Banking Dayan which it receives the funds
referred to in subparagraph (a), Settlement Bank shall transmit to Program
Banks in same-day funds the amou.nt of anynet deposit to Accounts; and
(c) Program Banks shall use their best efforts to transmit to Settlement
Bank in same-day funds the amoWlt of any net withdrawal from Accounts
within forty-five (45) minutes after receiving the instructions referred to in
paragraph 4 above, and in any event shall transmit such funds by not later
than 3:15 P.M. on the same Banking Day on Which they receive such
instructions, p:ovided that such instructions are received by Program Bank
no later than 2:30 P.M. .
(d) By 3:30 P.M. on the same Business Dayan which the foregoing actions
were taken, Settlement Bank shall remit to Participating Broker in s a m e ~
day funds the aggregate amount of all net withdrawals from Accounts for
that Business Day.
7. . If Participating Broker desires to sweep Customers' cash to
Proprietary Program. Banks identified in Schedule Vfi, Participating Broker shall
provide the information required in Section 7(a), (b) and (c) of the Agreement. in
the fonn and at the times specified in those paragraphs; DBTCA shall provide the
information required by Paragraph 8 of the Agreement.
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SCHEDULE VI
AMI.. Certification
November 18. 2008
Mr. Joseph Sarbinowski
Managing Director
Deutsche Bank Trust Company Americas
345 Park Avenue. 26
th
Floor
New York, NY 10154
Re: Annual Certification of Compliance with AML program.
Dear Mr. Sarbinowski:
Legem Clearing LLC ("Broker") has entered into the Broker-Dea)er
Money Market-Deposit Account Agreement with DBTCA and has become a party
to the Program Btmk Money Market J)eposit Account Agreement for Accounts of
Bro1."8r-Dealers (together, the "Program Agreements', pursuant to which Broker
acts as clearing or executing broker (such broker-dealers shall be referred to herein
as "IBDs',). under which the mDs' customers ("Customers") may participate in a
program (the "Program") by which Broker can tqake available to Customers on a
regular and continuous basis, accounts (the "Aeeount5j that are "money mlUket
deposit accounts", as defined in Section 204.2(d)(2) of the regulations of the
Fedem Reserve Board (12 C.F.R. § 204.2(d)(2», to be maintained at one or more
"depository institutions" (as defined in 12 U.S.C. § 1813(0)(1» that participate in
the Program (the "Program Banks,; Pursuant to the Program Agreements.
Broker has agreed to certify annually with DBTCA that it has implemented an
AML program and will perform (or IBDs wm perform) the- specified requirements
of ClP (as defmed below), and thatDBTCA may PIC?videa copy of such
certification to Program Banks.
As a broker-dealer registered as such with the Securities Exchange
Commission (the "Commission") under the Securities Exchange Act ofl934 (the
"Exchange Act"), Broker cmrently is ,subject to the Uniting and Strengthening
America by Providing Appropriate Tools Required to InteIcept and Obstruct
_ Terrorism Act of 2001 (the "USA PATRIOT Act',). the rules implementing the
anti-money laundering ("AML'j compliance program Mquirements of31 U.S.C. §
5318(h)>> and other rules and regulations under the Bank Secrecy Act (the "BSA").
Among the BSA rules and regulations to which Broker is subject is the broker-
dealer custOB1er identification program rule (the CIP Rule") jointly issued by the
Commission and the Department of the Treasuxy ("Treasury") under Section 326
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of the USA PATRIOT Act effective June 9, 2003, which is codified in Part 103 of
Title 31 of the Code of Federal Regulations. The CIP Rule requires, inter alia, that
broker-dealers implement reasonable procedures in the finn's customer
identification program ("ClP,,) to verify the identity of their customers; "customer"
is defined as "any person seeking to open an account" with the relevant IBD.
Broker represents that it has implemented an AML program and has
performed the specified requirements of its AML Progrmn. Specifically. as of the
date o f t b i ~ letter, Broker confll1J1S the following: .
o Each IBD is required to have internal policies and procedures in place for
verifying the identities of Customers;
• Each IBO is required to have designated an AML compliance officer; and
• In accordance with the USA PATRIOT Act, the rules implementing the
AML compliance program requirements of 31 U.S.C. § 5318(h), and other
rules and regulations under the BSA, each IBO has identified all Customers
for whom it acts as agent. Each IBD is required to retain, in accordance
with applicable regulations regarding record retention. all documentation
required to identify Customers.
Based upon our review of documents in its possession Broker has satisfied
itself that it has the authorization to take all actions with respect to Customers'
funds that it is obligated to perform pursuant to the Program Agreements.
Broker confirms that the IBDs are required to have the following client
identification procedures in place:
• .Eacb IBD is required to have risk-based procedures in place for verifying
the identity of each Customer) to the extent reasonable and practicable;
• Each IBD makes and maintains records related to verifYing Customers, and
maintains those records for at least five (5) years after the date that a
Customer account is closed; and
• Each IBD and Broker monitors the regulations administered by Treasury's
Offioe of Foreign Assets Control ("OFAC"). Each IBD and Broker uses its
best efforts to ensure compliance with the prohibitions and restrictions
mandated by OF AC that are applicable to IBD and Broker.
Attestation:
LEGENT CLEARING LLC
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Name: David Brant
Title: & CFO
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SCHEDULE VII
LIST OF PROPRIETARY PROGRAM BANKS
United Western Bank
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AppendixC
Form of Program Bank Agreement
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SCHEDULE X
By executing this schedule, (UParticipating Broker") agrees to become a party to
the Program Bank Money Market Deposit Account Agreement for Accounts of
BrokerNDealers by and between Deutsche Bank Trust Company Americas and
__________ ("Program Bank"), and further agrees as follows.
REPRESENTATIONS AND WARRANTIES AND AGREEMENTS
(Section 10 of the Agreement)
Participating Broker is a limited liability company duly organized, 'Validly existing
and in good standing under the laws of the State of Delaware.
NOTICES
For purposes of Section 18(d), all notices or other communications required or
permitted hereunder shall be in writing and shall be deemed given to Participating
Broker if(l) delivered personally or, (2) sent by overnight courier service, or (3) if
mailed by registered or certified mail (return receipt requested) when received, to:
Legent Clearing LLC
Compliance Department
9300 Underwood Ave.
Omaha, NE 68114
Date:
By:
38
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Title:
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TabC
Exhibit 79
2071
• t .....
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FEDERAL STOCK CHARTER
OTS Docket #6679
Charter No.
Section 1. Corporate title. The full corporate title of the Savings Bank. is "United
'Western Bank" (the "Savings Bank").
Section 2. Office. The home office shall be located in Denver, Colorado.
Section 3. Duration. The duration ofthe Savings Bank is perpetual.
Section 4. Purpose and powers. The purpose of the Savings Bank is to pursue
any or all of the lawful objectives of a Federal savings bank chartered under Section 5 of
the Home Owners' Loan Act and to exercise all of the express, implied, and incidental
powers conferred thereby and by all acts amendatory thereof and supplemental thereto,
subject to the Constitution and laws of the United States as they are now in effect, or as
they may thereafter be amended, and subject to all lawful and "applicable rules, .
regulations. and ordets of the Office of Thrift Supervision eOffice").
Section 5. Capital stock. The total number of shares of all classes of the capital
stock which the Savings Bank has the authority to issue is 600,000, all ofwhioh shall be
common of par value of $2.50 per share. The shares may be issued from time to
time as authorized by the board of directors without the approval of its shareholders,
except as otherwise provided in this Section S or to the extent that such approval is
required by governing law, rule, or issuance and shall not be less than the par value.
Neither promissory notes nor future services shall constitute payment or part payment for
the issuance of shares of the Saving Bank. The consideration for the shares shall be cash,
tangible or intangible property (to the extent direct investment in such property would be
pennitted to the Savings Bank), tabor or services actually perfonned for the Savings
Bank. or any combination of the forgoing. Tn the abs,ence of actual fraud in the
transaction, the value of such property, labor, or services, as determined by the board of
directors ofilie Savings Bank, shan be conclusive. Upon payment ofsuch'consideratiollt
such shares shatl be deemed to be ,fully paid and nonassessable. In the case of a stock
dividend, that part of the surplus of the Savings Bank which is transferred to stated
capital upon the issuance of shares as a share dividend shall be deemed to be the
consideration for their issuance.
Except for shares issuable in connection with the conversion oftha Savings Bank
from the mutual to t11e stock fonn of capitalization, no shares of common stock
(including shares issuable upon conversion. exchange, or exercise of other securities)
shall be issued, directly or indirectly, to officers, directors, or controlling persons of the
Savings Bank other than as part ofa general public offering or as qualifying shares to a
director, unless the issuance or the plan under which they would be issued has been
approved by a majority oftlle total votes eligible to be cast at a legal meeting.
2072
OTS Docket :f''S679
The hoIdel'S of the common stock shall exclusively possess all voting power, Each
holder· of sbares of common stock shall be entitled to one vote for each share held by
such holder. Subject to any provision for a liquidation account, in the event of any
liquidation, dissolution, or winding up of the Savings Bank, the holders of the common
stock shall be entitled, after payment or provision for payment of all debts and liabilities
of the Savings Bank. to receive the remaining assets of the Savings Bank available for
distribution, in cash or in kind. Each share of common.stock shall have the same relative
rights as and be identical in all respects with all the other shares of common stock.
Section 6. Cumulative voting. Holders of the capital stock of the Sayings Bank
shall not be permitted to cumulate their votes for election of directors.
Section 7. Preemptive rights. Holders of the Capital stock of the Savings Bank
shall not be entitled to preemptive rights with respect to any shares of the Savings Bank
which may be issued.
Section 8. Directors. The Savings Bank shall be under the direction of a board of
, .directoIs. The authorized number of directors, as stated in the Savings Bank's bylaws,
shall not be fewer than seven nor more than fifteen except when a greater number is
approved by the Office.
Section 9. Amendment of charter. Except as provided in Section 5, no
amendment, addition. alteration, change or repeal of this charter shall be made, unless
such is first proposed by the board of directors of the Savings Bank, then preliminarily
approved by the Office, which preliminary approval may be granted by the Office
pursuant to regulations specifying preapproved charter amendments, and thereafter
approved by the shareholders by a majority of the total votes eligible to be cast at a legal
meeting. Any amendment, addition, alteration, change, or repeal so acted upon shall be
effective upon filing with the Office in accordance with regulatory procedures or on such
other date th.B Office in its preliminary .
,1. ... -. /' '/ L ,/'" . .?'.: .
Attest: /j:t(p='f-if-(/j By: .:.:, • :.,.---,/
of the Sa.Yings Bank Chairman, Presi4eht, and CEO
:./ of the Savings Bank
Attest: Ie k-.
Office Supe
By: " - ....
Corporate Secretary of the Office
. of Thrift Supervision
Declared effective this 1
5t
day of September 2006.
2073
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([erttftcate of ([barter
,"

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-:'.... ...
- '" /""' \.,.-
"-'. - .(;"?, .. ,.
-" .. ..
'1fiis is to certifg that in accoraance witfi tlie provisions
of Section 5 of the :J{ome Owners Loan J2lct,
a iftarter was issue' to
UNITED BANK
witfi its home office at
COLORADO
Jl.ttest: Office of Thrift Supervision
Department of the Treasu

fJJy I'"....' , I - K 1 if)iret;tor
I--
Corporate Stt:rtftJ'!]
9J.C., £jfective9JQte: September 1. 2006
...
:.: ....
." ': AND RESTATED BYLAWS OF
j': I • UNITED WESTERN BANK
DENVER, COLORADO
ARTICLE I .. HOME OFFICE
The home office of Western Bank (the "Bank") shall beat 700 17
lh
Street.
Suite 100, Denver, Denver County, Colorado, 80202. .
ARTICLE II - SHAREHOLDERS
Section 1. Place of Meetings. All annual and special meetings of shareholders shall be
held at the home office of the Bank or at such other place as the board of directors may
determine.
Section 2.· Annual Meeting. A meeting of the shareholders of the Bank for the election
of directors and for the transaction of any other business of the Bank shall be held
annually within 180 days after the end of the Bank's fiscal year on the last Tuesday of
June, if nota legal holiday, and if a legal holiday, then on the next day following which is
not a legal holiday, at 9:00 a.m., or at such other date and time within such iBO-day
period as the Board of Directors may determine.
Section 3. Special Meetings. Special meetings of the sht:Jreholders for aoy purpose or
purposes, unless otherwise prescribed by regulations of ;the Office of Thrift
Supervision {"Office"}, may be called at any time by the Chairman of the Board, the
President, or a majority of the Board of Directors, and shall be called by the Chairman
of the Board, the President, or the Secretary upon the written request of the
shareholders of no less than one-tenth of all of the outstanding capital stock of the
Bank entitled to vote at the meeting. Such written request shall state the purpose or
purposes of the meeting and shall be delivered to the home office of the Bank
addressed to the Chairman of the Board, the or the Secretary.
Section 4. Conduct of Meetings. Annual and special meetings shall be conducted in
accordance with the most current edition of Robert's Rules of Order unless otherwise
prescribed by regulations of the Office or these bylaws. The Board of Directors shall
designate. when present, either the Chairman of the Board or President to preside at
such meetings. .
Section 5. . Notice of Meetings. Written notice stating the place. day, and hour of the
meeting and the purpose(s) for which the meeting Is called shall be delivered not fewer
than 20 nor more than 50 days before the date of the meeting, either personally or by
maD. by or at the direction of the Chairman of the Board, the President, or the
Secretary. or the Directors calling the meeting. to each shareholder of record entiUed to
vote at such meeting. If mailed, such notice shall. be deemed to be delivered when
UnIJed WeSllm 8anIc
AMENDED AHOAESTO\TSO BYlAWS
June 27. 2110&
deposited in the mail, addressed to the shareholder at the address as it appears on the
stock transfer books or records of the Bank as of the record date prescribed in Section
6 of this Article II with postage prepaid. When any shareholders' meeting, either annual
or special, is adjourned for 30 days or more, notice of the adjourned meeting shall be
given as in the case of an original meeting. It shall not be necessary to give any notice
of the time and place of any meeting adjourned for less than 30 days or of the business
to be transacted at the meeting, other than an announcement at the meeting at which
such adjournment is taken.
Section 6. Fixing of Record Date. For the purpose of determining shareholders entitled
to notice of or to vote at any meeting of shareholders or any adjournment, or
shareholders entitled to receive payment of any dividend, or in order to make a
determination of shareholders for any other proper purpose, the Board of Directors shall
fix In advance a date as the record date for any such determination of shareholders.
Such date in any case shall be not more than 60 days and, in case of a meeting of
shareholders. not fewer than 10 days prior to the date on which the particular action,
requiring such determination of shareholders, is to be taken. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this section, such determination shall apply to any adjournment.
Section 7. Voting Lists. At least 20 days before each meeting of the shareholders, the
officer or agent having charge of the stock transfer books for shares of the Bank shall
make a complete list of the shareholders entitled to vote at such meeting, or any
adjournment. arranged in alphabetical order, with the address and the number of
shares held by each. This list of shareholders shall be kept on file at the home office of
the Bank and shall be subject to inspection by any shareholder at any time during usual
business hours for a period of 20 days prior to such meeting. Such list shall also be
produced and kept open at the time and place of the meeting and shall be subject to
inspection by any shareholder during the entire time of the meeting. The original stock
transfer book shall constitute prima facie evidence of the shareholders entitled to
examine such list or transfer books or to vote at any meeting of shareholders.
In lieu of making the shareholder list available for inspection by sharehOlders as
provided in the preceding paragraph, the Board of Directors may elect to follow the
procedures prescribed in section 552.6(d) of the Office's regulations as now or
hereafter in effect.
Section 8. Quorum. A majority of the outstanding shares of the Bank entitled to vote,
represented in person or by proxy, shall constitute a quorum at a meeting of
shareholders. If less than a majority of the outstanding shares is represented at a
meeting, a majority of the shares so represented may adjourn the meeting from time to
time without further notice. At such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have been
transacted at the meeting as originally notified. The shareholders present at a duly
organized meetIng may continue to transact business until adjournment,
notwithstanding the withdrawal of enough shareholders to constitute Jess than a
Untied Western Bank
AMENDED BYLAWS
June 27. 2006
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quorum.
Section 9.· Proxies. At all meetings of shareholders, a shareholder may vote by proxy
executed In writing by the shareholder or by his duly authorized attorney In fact.
Proxies solicited on behalf of the management ·shall be voted as directed by the
shareholder or, in the absence of such direction. as determined by a majority of the
Board of Directors. No proxy shall be valid more than eleven months from the date of
its execution except for a proxy coupJed with an interest.
Section 10. Voting of Shares In the Name of Two or More Persons. When ownership
stands in the name of two or more persons. in the absence of written directions to the
Bank to the contrary. at any meeting of the shareholders of the Bank anyone or more
of such shareholders may cast. in person or by proxy. all votes to which such ownership
is entitled. In the event an attempt is made to cast conflicting votes. in person or by
proxy. by the several persons in whose names shares of stock stand, the vote or votes
to which those persons are entitled shall be cast as directed by arnaJority of those
holding such and present in person or by proxy at such meeting. but no votes shall be
cast for such stock If a majority cannot agree. .
Section 11. Voting of Shares by Certain HoldeC§. Shares standing in the name of
another corporation may.be voted by any officer. agent. or proxy as the bylaws of such
corporation may prescribe. or. in the absence of such proviSion, as the Board of
Directors of, such corporation may determine. Shares held by an administrator,
executor, guardian. or conservator may be voted by him. either In person or by proxy.
without a transfer of such shares Into his name. Shares standing in the name of a
trustee may be voted by him. either in person or by proxy. but no trustee shall be
entitled to vote shares held by him without a transfer of such shares Into his name.
Shares standing in the name of a receiver may be voted by such receIver. and shares
held by or under the control of a receiver may be voted by such receiver without the
transfer into his name if authority to do so is. contained In an appropriate order of the
court or other public authority by which such rece[ver was appointed.
A shareholder whose shares are pledged shall be entitled to vote such shares
untO the shares have been transferred into the name of the pledgee. and thereafter the
pledgee shall be entitled to vote the shares so transferred.
Neither treasury shares of its own stock held by the Bank nor shares held by
another corporation. if a majority of the shares entitled to vote for the election of
directors of such other corporation are held by the Bank, shall be voted at any meeting
or counted In determining the total number of outstanding shares at any given time for
purposes of any meeting.
Section 12. Cumulative Voting. Every shareholder entitled to vote at an election for
directors shall have the right to vote. in person or by proxy, the number of shares
owned by the shareholder for as many persons as there are directors to be elected and
Uraled We5Iem Bank
AMENDED 8VLAWS
June -0. ZOOS
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for whose election the shareholder has a right to vote. Shareholders shall not cumulate
their votes for the election of directors. .
Section 13. Inspectors of Election. In advance of any meeting of shareholders, the
Board of Directors may appoint any persons other than nominees for office as
inspectors of election to act at such meeting or any adjournment. The number of
inspectors shall be either one or three. Any such appointment shall not be altered at
the meeting. If inspectors of election are not so appointed, the Chairman of the Board
or the President may, or on the request of not fewer than 10 percent of the votes
represented at the meeting shall, make such appointment at the meeting. If appointed
at the meeting, the majority of the votes present shall determine whether one or three
inspectors are to be appointed. In case any person appointed as inspector fails to
appear or fails or refuses to act, the vacancy may be filled by appointment by the Board
of Directors in advance of the meeting or at the meeting by the Chairman of the Board
or the President.
Unless otherwise prescribed by regulations of the Office, the duties of such
inspectors shall Include: determining the number of shares and the voting power of
each share, the shares represented at the meeting, the existence of a quorum, and the
authenticity, validity and effect of proxies; receiving votes, ballots, or consents; hearing
and determining all challenges and questions in any way arising in connection with the
rights to vote; counting and tabulating all votes or consents; determining the result; and
such acts as may be proper to conduct the election or vote with faimess to all
shareholders.
Section 14. New Business. Any new business to be taken up at the annual meeting
shall be stated in writing and filed with the Secretary of the Bank at least five days
before the date of the annual meeting, and all business so dated, proposed, and filed
shall be considered at the annual meeting; but no other proposal shall be acted upon
at the annual meeting. Any shareholder may make any other proposal at the annual
meeting and the same may be discussed and considered, but unless stated in writing
and filed with the Secretary at least five days before the meeting. such proposal shall
be laid over for action at an adjourned, special, or annual meeting of the shareholders
taking place 30 days or more thereafter. This provision shall not prevent the
consideration and approval or disapproval at the annual meeting of reports of officers,
directors, and committees; but In connection with such reports, no new business shall
be acted upon at such annual meeting unless stated and filed as herein provided.
Section 15. Informal Action by Shareholders. Any action required to be taken at a
meeting of the shareholders, or any other action which may be taken at a meeting of
shareholders, may be taken without a meeting if consent in writing, setting forth the
action so taken, shall be given by all of the shareholders entitled to vote with respect to
the subject matter.
United Westem Bank
AMENDED BYl.AWS
Juqe 27, 200$
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ARTICLE III .. BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the Bank shall be under the
direction of its Board of Directors. The Board of Directors shall annually elect a
chairman of the board and a president from among its members and shall designate.
when present. either the Chairman of the Board or the President to preside at its
meetings.
Section 2. Number and Term. The Board of Directors shall consist of nine members
and shall be elected for the lesser of a term of one year or until their successors are
elected and qualified. All Directors shall be elected by ballot annually.
Section 3. Regular Meetings. A regular meeting of the Board of Directors shall be held
without other notice than this bylaw Immediately after. and at the same place as, the
annual meeting of shareholders. The Board of Directors may provide. by resolution. the
time and place, within the Bank's normal lending territory, for the holding of additional
regular meetings without other notice than such resolution.
Section 4. Qualification. Each director shall at all times be the beneficial owner of not
less than 100 shares of capital stock of the Bank unless the Bank is a wholly owned
subsidiary of a holding company.
Section 5. Special Meetings. Special meetings of the Board of Directors may be
called by or at the request of the Chairman of the Board, the President, or one-third of
the directors. The persons authorized to call special meetings of the Board of Directors
may fix any place. within the Bank's normal lending territory, as the place for holding
any special meeting of the Board of Directors called by such persons.
Members of the Board of Directors may partiCipate in special meetings by
means of conference telephone or similar communications equipment by which all
persons participating in the meeting can hear each other. Such participation shall
constitute presence in person.
Section 6. Notice. Written notice of "any special meeting shall be given to each director
at least 24 hours prior thereto when delivered personally or by telegram, or at least five
days prior thereto when delivered by mail at the address at which the director Is most
likely to be reached. Such notice shall be deemed to be delivered when depOSited in
the mail so addressed, with postage prepaid if mailed or when delivered to the
telegraph company if sent by telegram. Any director may waive notice of any meeting
by a writing filed with the secretary. The attendance of a director at a meeting shall
constitute a waiver of notice of such meeting,. except where a director attends a meeting
for the express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
Unlled Western San!<
AMENDED BYLAWS
June27,aaos
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2079
Section 7. Quorum A majority of the number of directors fixed by Section 2 of this
Article III shall constitute a quorum for the transaction of business at any meeting of the
Board of Directors; but if less than such majority is present at a meeting, a majority of
the directors present may adjourn the meeting from time to time. Notice of any
adjourned meeting shall be given in the same manner as prescribed by Section 50f this
Article III.
Section 8. Manner of Acting. The act of the majority of the directors present at a
meeting at which a quorum is present shall be the act of the Board of Directors, unless
a greater number Is prescribed by regulation of the Office or by these bylaws.
Section 9. Action without a meeting. Any action required or permitted to be taken by
the Board of Directors at a meeting may be taken without a meeting If a consent in
writing, setting forth the action so taken, shall be signed by all of the directors.
Section 10. Resignation. Any director may resign at any time by sending a written
notice of such resignation to the home office of the Bank addressed to the Chairman of
the Board or the President. Unless otherwise specified. such resignation shan take
effect upon receipt by the Chairman of the Board or the President. More than three
consecutive absences from regular meetings of the Board of Directors, unless excused
by resolution of the Board of Directors, shall automatically constitute a resignation,
effective when such reSignation Is accepted by the Board of Directors.
Section 11. Vacancies. Any vacancy occurring on the Board of Directors may be filled
by the affirmative vote of a majority of the remaining directors although less than a
quorum of the Board of Directors. A director elected to fill a vacancy shall be elected to
serve until the next election of directors by the shareholders. Any directorship to be
filled by reason of an increase in the number of directors may be filled by election by
the Board of Directors for a term of office continuing only until the next election of
directors by the shareholders.
Section 12. Compensation. Directors, as such, may receive a stated salary for their
services. By resolution of the Board of Directors, a reasonable fixed sum. and
reasonable expenses of attendance, if any, may be allowed for actual attendance at
each regular or special meeting of the Board of Directors. Members of either standing
or special committees may be allowed such compensation for actual attendance at
committee meetings as the Board of Directors may determine.
Section 13. Presumption of Assent. A director of the Bank who is present at a meeting
of the Board of Directors at which action on any Bank matter is taken shall be
presumed to have assented to the action taken unless his dissent or abstention shall be
entered in the minutes of the meeting or unless he shall file a written dissent to such
action with the person acting as the secretary of the meeting before the adjournment
thereof or shall forward such dissent by registered mail to the Secretary of the Bank
within five days after the date a copy of the minutes of the meeting is received. Such
right to dissent shall not apply to a director who voted in favor of such action. .
Unllell We$lem Bank
AMENDE08VLAWS
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Section 14. Removal of Directors. At a meeting of shareholders called expressly for
that purpose, any director may be removed for cause by a vote of the holders of the
shares then entitled to vote at an election of directors. If less than the entire board is to
be removed, no one of the directors may be removed if the votes cast against the
removal would be sufficient to elect a director if then cumulatively voted at an election
of the 'class of directors of which such director is a part. Whenever the holders of the
shares of any class are entitled to elect one or more directors by the provisions of the
charter or supplemental elections thereto, the prOVisions of this selection shall apply, in
respect to the removal of a director or directors so elected, to the vote of the holders of
the outstanding shares of that class and not to the vote of the outstanding shares as a
whole.
ARTICLE IV • TRUST DIVISION
Section 1. Trust Division. There shall be a department of the Bank known as the Trust
Division that shall perform the fiduciary responsibilities of the Bank.
Section 2. Trust Committee. There shall be a committee to be known as the Trust
Committee consisting of the President and three or . more other members to be
appointed by the Board of Directors from the officers, directors and advisory directors of
the Bank. with such members serving for such terms as may be designated by the
Board, with the exception of the President, who shall be a permanent member of the
Committee. This Committee shall have general supervision of the Trust Division of the
Bank, shall have the right to determine the procedures of the Trust Division, including
the Trusts to be handled by the Bank and Investments to be made of uninvested Trust
funds and shall perform all such duties and perform all such acts as have been or from
time to time may be prescribed and authorized by the Board. In the event of any
vacancy on the Committee for any cause, the Board may fill such vacancy by
appointing another member to fill the unexpired term of such member.
Section 3. Executive Trust Officer. There shall be an Officer of this Bank whose duties
shall be to manage, supervise and direct all activities of the Trust Division under the
supervision of the Trust Committee. He shall do or cause to be done all things
necessary or proper in carrying on the business of the Trust Division in accordance with
provisions of law and applicable regulations. He shall act. pursuant to opinion of
counsel where such opinion is deemed necessary. Opinions of counsel shall be
retained on file in connections with all important matters pertaining to fiduciary activities.
Such officer shall be responsible for all assets and documents held by the Bank in
connection with fiduciary matters. The Board may appoint such other officers of the
Trust Division as it may deem necessary, with such duties as may be assigned.
Section 4. Audit Committee. The Board of Directors shall appoint a committee of
three or more directors or advisory directors, exclusive of any active officers of the
United Westem Sank
AMENDED BVl.AWS
JUlIe 27, 2006
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Bank. which shall as least once during each calendar year. and within fifteen months of
the last such audit, make suitable audits of the Trust Division or cause suitable audits
to be made by auditors responsible only to the Board of Directors, and at such time
shall ascertain whether the department has been administered in accordance with law;
applicable regulations and sound fiduciary principles.
Section 5. Trust Division Files. There shall be maintained in the Trust Division files
containing all fiduciary records necessary to ensure that its fiduciary responsibilities
have been properly undertaken and discharged.
ARTICLE V - EXECUTIVE AND OTHER COMMITTEES
Section 1. Appointment. The Board of Directors, by resolution adopted by a majority of
the full board, may designate the chief executive officer and two or more of the other
directors to constitute an executive committee. The designation of any committee
pursuant to this Article V and the delegation of authority shall not operate to relieve the
board of directors, or any director of any responsibility imposed by law or regulation.
Section 2. Authoritv. The executive committee, when the Board of Directors is not in
session, shall have· and may exercise all of the authority of the Board of Directors
except to the extent, if any, that such authority shall be limited by the resolution
appointing the executive committee; and except also that the executive committee shall
not have the authority of the Board of Directors with reference to: the declaration of
dividends; the amendment of the charter or bylaws of the Bank, or recommending to
the stockholders a plan of merger, consolidation, or conversion; the sale, lease or other
disposition of all or substantially all of the property and assets of the Bank. otherwise
than in the usual and regular course of its business; a voluntary dissolution of the
Bank; a revocation of any of the foregoing; or the approval of a transaction In which
any member of the executive committee, directly or indirectly. has any material
beneficial interest.
Section 3. Tenure. Subject to the provisions of Section 8 of this Article V. each
member of the executive committee shall hold office until the next regular annual
meeting of the Board of Directors following his or her designation and until a successor
is designated as a member of the executive committee.
Section 4. Meetings. Regular meetings of the executive committee may be held
without notice at such times and places as the executive committee may fix from time to
time by resolution. Special meetings of the executive committee may be called by any
member thereof upon not less than one day's notice stating the place, date, and hour of
the meeting, which notice may be written. or oral. Any member of the executive
committee may waive notice of any meeting and no notice of any meeting need be
given to any member thereof who attends in person. The notice of a meeting of the
executive committee need not state the business proposed to be transacted at the
Unlied Weslem Bank
AMENDED BYLAWS
.rune 27. 2005
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meeting.
Section 5. Quorum. A majority of the members of the executive committee shall
constitute a quorum for the transaction of business at any meeting thereof, and action
of the executive committee must be authorized by the affirmative vote ofa majority of
the members present at a meeting at which a quorum is present.
Section 6. Action Without a Meeting. Any action required or permitted to be taken .by
the executive committee at a meeting may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by all of the members of the
executive committee.
Section 7. Vacancies. Any vacancy in the executive committee may be filled by a
resolution adopted by a majority of the. full board of directors.
Section 8. Resignations and Removal. Any member of the executive committee may
be removed at any time with or without cause by resolution adopted by a majority of the
full Board of Directors. Any member of the executive committee may resign from the
. executive committee at any time by giving written notice to the president or secretary of
the Bank. Unless otherwise specified, such resignation shall take effect upon its
receipt; the acceptance of such resignation shall not be necessary to make it effective.
Section 9. Procedure. The executive committee shall elect a presiding officer from its
members and may fix its own rules of procedure which shall not be inconsistent with
these bylaws. It shall keep regular minutes of its proceedings and report the same to
the Board of Directors for its information at the meeting held next after the proceedings
shall have occurred ..
Section 10. Other Committees. The Board of Directors may by resolution establish an
audit, loan, or other committee composed of directors as they may determine to be
necessary or appropriate for the conduct of the business of the Bank and may prescribe
the duties, constitution, and procedures thereof.
ARTICLE VI - OFFICERS
Section 1. Positions. The officers of the Bank shall be a president, one or more vice
preSidents. a secretary, and a treasurer, each of whom shall be elected by the Board of
Directors. The Board of Directors may also designate the Chairman of the Board as an
officer. The president shall be the Chief Executive Officer. unless the Board of
Directors designates the Chairman of the Board as Chief Executive Officer. The
president shall be a director of the. Bank. The offices of the secretary and treasurer
may be held by the same person and a vice president may also be either the secretary
or the treasurer. The Board of Directors may designate one or more vice presidents as
Untied Weslem Bank
AMENDEO BYLAWS
J.uno V. 2006
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2083
executive vice president or senior vice president. The Board of Directors may also elect
or authorize the appointment of such other officers as the business of the Bank may
require. The officers shall have such authority and perform such duties as the Board of
Directors may from time to time authorize or determine. In the absence of action by the
Board of Directors, the officers shall have such powers and duties as generally pertain
to their respective offices.
Section 2. Election and Term of Office. The officers of the Bank shall be elected
annually at the first meeting of the Board of Directors held after each annual meeting of
the stockholders. If the election of officers is not held at such meeting. such election
shall be held as soon thereafter as possible. Each officer shall hold office until a
successor has. been duly elected and qualified or until the officer's death, resignation, or
removal In the manner hereinafter provided. Election or appointment of an officer,
employee, or agent shall not of itself create contractual rights. The Board of Directors
may authorize the Bank to enter into an employment contract with any officer in
accordance with regulations of the Office; but no such contract shall impair the right of
the Board of Directors to remove any officer at any time in accordance with Section 3 of
this Article VI.
Section 3. Removal. Any officer may be removed by the Board of Directors whenever
in its judgment the best Interests of the Bank will be served thereby, but such removal,
other than for cause, shall be without prejudice to the contractual rights. if any, of the
person so removed.
Section 4. Vacancies. A vacancy In any office because of death, resignation, removal,
disqualification, or otherwise may be filled by the Board of Directors for the·unexpired
portion of the term.
Section 5. Remuneration. The remuneration of the officers shall be fixed from time to
time by the Board of Directors.
ARTICLE VII • CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts. To the extent permitted by regulations of the Office, and except
as otherwise prescribed by these bylaws with respect to certificates for shares, the
Board of Directors may authorize any officer, employee, or agent of the Bank to enter
into any contract or execute and deliver any instrument in the name of and on behalf of
the Bank. Such authority may be general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the Bank and no evidence
of indebtedness shall be Issued in its name unless authorized by the Board of Directors.
Such authority may be general or confined to specific instances.
Section 3. Checks. Drafts. etc. All checks, drafts, or other orders for the payment of
10
United Western Bank
AMENDED BYLAWS
June 27. :!005
2084
money, notes, or other evidences of indebtedness Issued in the name of the Bank shall
be signed by one or more officers, employees or agents of the Bank in such manner as
shall from time to time be determined by the Board of Directors.
Section 4. Deposits. All funds of the Bank not otherwise employed shall be deposited
from time to time to the credit of the Bank in any duly authorized depositories as the
Board of Directors may select.
ARTICLE VIII - CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. Certificates for Shares. Certificates representing shares of capital stock of
the Bank shall be in such form as shall be determined by the Board of Directors and
approved by the Office. Such certificates shall be signed by the Chief Executive Officer
or by any other officer of the Bank authorized by the Board of Directors, attested by the
secretary or an assistant secretary. and sealed with the corporate seal or facsimile
thereof. The signatures of such officers upon a certificate may be facsimiles if the
certificate is manually signed on behalf of a transfer agent or a registrar other than the
Bank Itself or one of its employees. Each certificate for shares of capital stock shall be
consecutively numbered or othelWise identified. The name and address of the person
to whom the shares are issued, with the "number of shares and date of issue, shall be
entered on the stock transfer books of the Bank. All certificates surrendered to the
Bank for transfer shall be canceled and no new certificate shall be issued until the
former certificate for a like number of shares has been surrendered and canceled,
except that in the case of a lost or destroyed certificate, a new certificate may be issued
upon such terms and indemnity to the Bank as the Board of Directors may prescribe.
Section 2. Transfer of Shares. Transfer of shares of capital stock of the Bank shall be·
made only on its stock transfer books. Authority for such transfer shall be given only by
the holder of record or by his legal representative, who shall furnish proper evidence of
such authority, or by his attorney authorized by a duly executed power of attorney and
filed with the Bank. Such transfer shall be made only on surrender for cancellation of
the certificate for such shares. The person in whose name shares of the capital stock
stand on the books of the Bank shall be deemed by the Bank to be the owner for all
purposes.
ARTICLE IX .. FISCAL YEAR; ANNUAL AUDIT
The fiscal ye.ar of the Bank shall end on the 31 st day of December of each year. The
Bank shall be subject to an annual audit as of the end of its fiscal year by independent
public accountants apPOinted by and responsible to the Board of Directors.
United WesJem Bank
AMEHOEO BYLAWS
Juna 27.2006
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2085
The apPointment of such accountants shall be subject to annual ratification by the
shareholders.
ARTICLE X .. DIVIDENDS
Subject to the terms of the Bank's charter and the regulations and orders of the Office,
the Board of Directors may, from time to time, declare, and the Bank may pay,
dividends on its outstanding shares of capital stock.
ARTICLE XI .. INDEMNIFICATION OF DIRECTORS, OFFICERS
AND EMPLOYEES
Matrix Capital Bank shall indemnify its directors, officers and employees in accordance
with the following requirements:
Section 1. Definitions and Rules of Construction
A. DEFINITIONS AND PURPOSES OF THIS BYLAW.
1. Action.
Any judicial or administrative proceeding, or threatened proceeding,
whether civil, criminal or otherwise, Including any appeal or other
proceeding for review.
2. Court.
Includes, without limitation, any court to which or in which any appeal or
any proceeding for review is brought.
3. Final Judgment.
A judgment, decree or order which is not appealable or as to which the
period for appeal has expired with no appeal taken.
4. Settlement.
Includes entry of a judgment by consent or confession or a plea of guilty
or nolo contendere.
B. References in this Bylaw to any individual or other person, including the Bank,
shall include legal representatives, successors and assigns thereof.
Uniled Weslem Bank
AWiNDED BYLAWS
Jone 27, 2006
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Section 2. General. Subject to Section 3 of this Bylaw, the Bank shall indemnify any
person against whom an action is brought or threatened because that person is or was
a director, officer or employee of the Bank, for:
A. Any amount for whrch that person becomes liable under a judgment in such
action; and
B. Reasonable costs and expenses, including reasonable attorney's fees, actually
paid or incurred by that person in defending or settling such action. or in
enforcing his rights under this Bylaw If he attains a favorable judgment in such
enforcement action.
Section 3. Requirements. Indemnification shall be made to such person under Section
2 of this Bylaw only if: .
A. final jUdgment on the merits is in his favor; or
B. in case of (1) settlement, (2) final judgment against him. or (3) final judgment In
his favor, other than on the merits, if a majority of the disinterested directors of
the Bank determine that he was acting In good faith within the scope of his
employment or authority as he could reasonably have believed under the
circumstances was in the best interests of the Bank or its members. However,
no indemnificatIon shall be made unless the Bank gives the Office of Thrift
Supervision at least 60 days' notice of its Intention to make such indemnificatioh.
Such notice shall state the facts on which the action arose, the terms of any
settlement, and any disposition of the action by a court. Such notice, a copy
thereof, and a certified copy of the resolution containing the required
determination by the board of directors shall be sent to the Office, who shall
promptly acknowledge receipt thereof. The notice period shall run from the date
of such receipt. No such indemnification shall be made if the Office advises the
Bank, in writing. within such notice period, of its objection thereto.
Section 4. Insurance. The Bank may obtain insurance to protect it and its directors,
officers, and employees from potential loses arising from claims against any of them for
alleged wrongful acts, or wrongful acts, committed in their capacity as directors, officers
or employees. However, the Bank may not obtain insurance which provides for
payment of losses of any person incurred as a consequence of his willful or criminal
misconduct. ,
Section 5. Payment of Expenses. If a majority of the directors of the Bank concludes
that, in connection with an action, any person ultimately may become entitled to
indemnification under this Bylaw, the directors may authorize payment of reasonable
costs and expenses, Including reasonable attorney's fees. arising from the defense or
settlement of such action. Nothing in this Section shall prevent the directors of the
Bank from imposing such conditions on a payment of expenses as they deem
warranted and in the interests of the Bank. Before making advance payment of
Uniled western Bank
AMENDED BYLAWS
June 21. 2006
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2087
. .
.... ,.
expenses under this Section, the Bank shall obtain an agreement that the Bank will be .
repaid if the person on whose behalf payment is made Is later determined not to be
entitled to such indemnification:· .
ARTICLE XII • CORPORATE SEAL
The Board of shall provide a Bank seal which shall be two concentric circles
between Which shall be the name of the Bank; The year of Incorporation or an emblem
may appear In the center.
ARTICLE XIII • AMENDMENTS
These bylaws may be amended in a manner consistent with regulations of the Office at
any tIme by a majority of the full Board of Directors or by a majority of the votes cast by
the stockholders of the Bank at any legal meeting •
14
2088
. ;
',' '.'
WAIVER OF NOTICE
06 SEt> -':j i\ii MEETING
MATRIX CAPITAL BANK
Denver, Colorado
The undersigned. constituting the sole shareholder of the outstanding shal'es of common
stock of Matrix Capital Bank, 700 17th Street, Denver, Colorado (the "Bank"), a federal savings
bank. hereby waives the mailing and timeliness of notice to shareholders describing the time.
place and object of the Bank Shareholders' Meeting to be held to elect directors of the Bank and
to transact such other business as may be necessary or advisable.
DATED this 1st day of September, 2006.
UNITED WESTERN BANCORP INC .
. a Colorado Corporation, Sole Shareholder
By: .-==::;;....===4-...=i!!!.::::.!:::rz?----
Scot T. Wetzel, President
2089
. . r":
.1 i· ... ••
'. " .
_ MATRIX CAPITAL BANK
... t: 1"::,0 _..,: ;\i\ 'J8 DENVER, COLORADO
UO ''".It-1 ...
WRITTEN CONSENT OF SOLE SHAREHOLDER
United Western BanCOl"p, Inc., a Colorado cOl"poration, the sale shareholder (the
"Sole Shareholder
ll
) of record of Matrix Capital Bank, 700 17th Street. Denver, Colorado, a
federal savings bank (the "Bank"), hereby waives any notice required to be given to the Sole
Shareholder, and hereby consents tl1at when this Written Consent is executed by the Sole
Shal:eholder, the resolutions below shall be passed and adopted as resolutions of the Sole
Shareholder of the Bank with the same force and effect as if adopted at the annual meeting of the
Sole Shareholder duly and held:
WHEREAS, the directors of the Bank have approved the Amended and Restated Bylaws
of Matrix Capital Bank (the "Bylaws") by resolutions dated June 27, 2006; and
WHEREAS, the directors of the Bank have approved the amended Charter of Matrix
Capital Bank (the "Charter") by resolutions dated August 3, 2006 and effective July 31, 2006;
and
WHEREAS, such Bylaws Charter have had 110 objection expressed by the Office of
Thrifl. Supervision; it is therefore
RESOL YED, that the Bylaws and Charter are hereby ratified.
RESOLVED, that the President, any Vice President and the Secretary be. and they
hereby are, authorized, empowered and directed to take allY and all actions, including but not
limited to, execution of an documents, necessary or appropriate to effect the intent of these
resolutions.
DATED this 1 st day of September, 2006.
ATTEST:

Sec
UNITED WESTERN BANCORP INC.
a Colorado Corporation, Sole
2090
TabC
Exhibit 80
2091
Office of Thrift Supervisio'n
e artment of the Treasury Regional Director, Weslrlm Region
225 El\St John Carpenter Freeway, Suite SOD, Irving, TX 75062-2326 • Telephone: (972) 277-9500
P.O. Box 619027. DallaslFort Wonh. TIC 75261-9027· Fax: .(972) 277-9501
December 3,2010
OTS Docket No. 06679
Board of Directors
Attn: Mr. James R. Peoples, Chairman
United Western Bank
700 1 th Stxeet. Suite 100
Denver, CO 80202
Re: Directive to Reflect Additional OTTI Cbarges
Dear Board Members:
JI1A SECURE E-MAIL
AND UPS NEXT DAY AIR
We began a comprehensive examination of United Western Bank. (the Bank.) on September 27,
2010. On October 2 5 ~ 2010, we provided management with an Exception Sheet that detailed our
findings on the Bank's modeling and recognition of Other-Than-Temporary-Impairment. (OTTI)
in its portfolio of non-agency mortgage-backed securities.
One of the corrective actions outlined in the Exception Sheet was for the Bank to recognize an
additional $15.1 million in orn cbarges as of June 30, 2010. The Bank did not report the $15.1
million of additional OTTI in the June 30, 2010 Thrift Financial Report (TFR) or in public
:financial statement filings. We subsequently advised Bank management that we had updated our
review using September 30,2010 infonnation, and identified the additional OTTI charges to be
$16.3 million above what had been reported in the September 30. 2010 TFR.
Bank management provided us with a written response to the Exception Sheet on October 27,
2010. The response concluded that there was no ''material O'ITI that should be recognized for
any prior period." On November 1 0, 2010, managen'lent submitted a Remediation Plan to us that
proposed the recognition of an incremental charge of $1 0.5 million as of September 30. 2010. .
The Remediation Plan and a letter from Benjamin Hirsh, Interim Chief Financial Officer of
Urtited Western Bancorp. Inc., described the technical modeling basis for that proposed amount.
We have carefully reviewed the Bank's communications of October 27 and November 10. The
results of our reviews are enclosed. We find that the Bank's modeling approach and.assumptions
do not conform to regulatory reporting requirements, and reiterate our determination that an
additional $16.3 million in OTTI charges is necessary as of September 30. 2010. The Bank is
2092
Board of Directors
United Western Bank
Page 2
December 3, 2010
directed to re-file its September 30.2010 TFR--the earliest TFR available for amendment--to
reflect the additional OT11 charges. We direct the Bank to file the amended TFR electronically
with the Office of Thrift Supervision (OTS) no later than 5:00 p.m. Mountain Time on Monday,
December 6, 2010.
Further, the Bank, in consultation with its extemalauditors, securities counsel, and the Securities
and Exchange Commission (SEC), ifnecessary, should consider whether earlier period SEC
reports should he restated to reflect these OTn charges.
The Bank may appeal this directive pursuant to OTS Thrift Bulletin 68b.
If you have questions, please contact Assistant Director Nicholas Dyer at (650) 746-7025 or
FieJd Manager Kevin Swanson at (650) 746-7066. .
Sincerely,
9:!21 (L 2JJ.
Philip A. Gerbick
Regional Director
Enclosures (2)
cc: Ms. Kristie K. Elmquist, Acting Regional Director, FDIC-Dallas
Mr. Joseph A. Meade, Assistant Regional Director, FDIC-Dallas
Mr. Lawrence Kaplan, Paul, Hastings, Janofsky & Walker LLP
2093
TabC
Exhibit 80 A
See Tab C,. Exhibit 44 0
2094
TabC
Exhibit 80 B
See TabC, Exhibit 44 E
2095
TabC
Exhibit 80 C
See Tab C, Exhibit 44 N
2096
TabC
Exhibit 81
2097
UWBK 10-Q 9/30/2008
Section 1: 10-Q (UWBK FORM 10-Q Q3 2008)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
S QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2008
OR
£ TRANSmON 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 WESTERN BANCORP, INC.
(Exact name of registrant as specified in its charter)
Colorado
84-1233716
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
700 17
th
Street, Suite 2100
Denver, Colorado
(Address of principal executive offices)
Registrant's telephone number, including area code: (303) 595-9898
80202
(Zip Code)
. Indicate by check mark whether the registrant (I) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 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 RNo £
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated
filer" in Rule 12b-2 ofthe Exchange Act. (Check one): Large accelerated filer £ Accelerated filer R Non-accelerated filer £ .
Indicate by check mark whether the registrant is a shell company (as dermed in Rule 12b-2 of the Exchange
Act). Yes£NoR
Number of shares of Common Stock ($0.000 1 par value) outstanding at the close of business on November 7, 2008 was 7,227,189 shares.
2098
PART \. FINANCIAL INFORMATION
ITEM I. Financial Statements - (Unaudited)
2
2099
Table of Contents
See accompanying notes to consolidatedjinancial statements.
Part 1- Flnaneiallnrormation
Item 1. Flnaneial Statements - (Unaudited)
United Western Bancorp,1nc. and Subsidiaries
Consolidated .Baiance Sheets .
(Unaudited)
(Dollars in thousands. exc:ept share information)
3
2100
September 30,
2008
Deeember 31,
2007
Table of Contents
See accompanying notes to consolidatedfinancial statements.
United Western Bancorp, Inc. and Snbsldlaries
Consolidated Statements oflncome
(Unaudited)
(Dol/ars in thousands. except share infarmation)
4
2101
Qnarter Ended
September 30,
2008 2007
Nine Months Ended
September 30,
2008 2007
Table o/Contents
Common Stock
Shares Amount
United Western Bancorp, Inc. and Sabsldleries
Consolidated Statements of Shareholders' Equity
(Unaudited)
(Doliarsln thousands. except share information)
Additional Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss Total
Comprehensive
Loss
Nine Months Ended

Cumulative effect of
adoption ofa new
accounting principle on
2008
See notes to consolidatedfinanclal statements.
s
2102
(21,398) S 100,433
Table of Contents
Continl/ed
United Western BaDeorp,lne. and Snbsldlarles
CoDsolidated Statements of Cash Flows
(Unaudited)
(Dollars in thol/sands)
6
2103
Nine Months Ended September 30,
ZOOB Z007
Table"o/Contents
See accompanying notes to consolidatedfinancial statements.
United Western Baneorp, Ine. and Subsidiaries
Consolidated Statements of Cash Flows - continued
(Unaudited)
(Dollars in thousands)
7
2104
Nine Months Ended September 30,
1008 " 1007
Table or Contents
1. Bois of Presentation and SigDIftcant Accounting Policies
UDited Weste.rn Bancorp, Inc. and SlIbsldiarles
Notes to Unaudited Consolidated Financial Statements
September 30, 2008
United Western Bancolp, Inc. (the "Company") is a unitsry thrift holding company.and, through its subsidiaries, a diveraified financial services company beadquartered in Denver,
Colorado. The Company's operations are conducted primarily through United Western Bank® (the "Bank"). Sterling Trust Company ("Sterling"), Matrix Financial Services Coiporation
("Matrix Financial,,), and UW Investment Services, Inc. ("UW Investment") (formerly known as First Matrix Investment Services Corp.), all of which are wholly owned subsidiaries of
the Company. '
Through the Batilc. 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 Colorad? Front Range spans Eastern slope of Rocky Mountains -: from Pueblo to Fort Collins, and includes the
melrOpolitsn Denver marketplace. We bave also expanded With a loan production office IDto Aspen, Colorado, servlDg Aspen and the Roarmg Fork Valley. As of September 30, 2008, we
had opened five full service banking locations in downtown Denver, Cherry Creek, Boulder, Loveland and Fort Collins. On October 20, 2008, we opened our sixth full service banking
office in Longmont. We plan to open banking offices in South Denver near Hampden Av.enueand Interstste2S before December 31; 2008, and in the Denver Tech Center by April 2009.
We· plan to grow the Bank network to an estimated ten to 12 community bank locations over the next three to five years. We originate SBA loans on a national basis. In addition to the
community-based banking operations of the Bank, we also offer deposit services to institutional customers, as well as custodial, administrstion and escrow serVices through Sterling.
From time-to-time in this document we refer to certain assets, for example, one-to-fOur family residential mortgage loans ("residential loans"), purchased SBA loans and mortgage-
backed securities and certain other assets of United Western Bank that existed as of December 9, 200S, as "wholesale" or "legacy" assets.
The consolidated financial statements of the Company and its subsidiaries in this Quarterly Report on Form IO-Q have not been audited by an independent registered public accounting
firm but in the opinion of management, reflect all adjustments necessary for a fair presentation of the Company's financial position and results of operations. The consolidated financial
state'ments bave been prepared in accordance with accounting principles generally accepted in the United States of Americo ("GAAP"). These interim financial statements bave been
prepared in accord8nce with the instructions to Form 1O-Q and Rule 10-01 of Regulation S-X and serve to update the Company's 2007 Annual Report on Form 10-K{"FOIDlIo.K").
These financial statements do not all. of notes to c?nstitute a complete set of statements under GAAP applicable to annual periods.
Accordingly, they should. be read ID conjunction :WIth the financiallDformation contalDed ID the Form 100K. In the opinion of management, all adjustments (consisting of only normal
recurring accruals unless otherwise disclosed in this Form 10-Q) necessary for a fair have been included. The results of operations for the interim periods disclosed herein
are not necessarily indicstive of results that may be expected for the full year or any future penod.
SIgnificant Accounting Estimates
The Company bas estsblished various accounting estimates that govern the application of GAAP in the preparation and presentation the Company's consolidated financial
statements. Certain accounting estimates involve significant judgments, assumptions and estimates by management that have a material impact on the carrying value of certain assets
and liabilities, disclosures of contingent assets and liabilities, and the reported amounts of income and expenses during the reporting period which management considers to be critical
accounting estimates. The judgments, assumptions and estimates used by management are based on historical experience, management's 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
materially from these judgments and estimates, which could have a material impact on the carrying values of assets and liabilities and the results of operstions of the Company.
8
2105
Table of Conlents
The Company the allowance for credit losses, the valuation ofloans held for sale, and the determination of temporary vs. other-than-temporary impairment of securities as critical
accounting estimates that require significant judgments, assumptions and estimates be used in preparation of its consolidated financial statements. See further detail in this Note for a
detailed description of the Company's process and methodology related to these critical accounting estimates.
Allowance for Credit Losses
The Company currently views the determination of the allowance for credit losses as a critical accounting policithat requires significant judgments, assumptions and estimates used in
preparation of its consolidated financial statements. The .allowance for credit is management's estimate of probable credit losses that are inherent in the loan portfolio.
Management takes into consideration factors such as the faIr value of the underlYlDg 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.
The allowance for credit losses consists of four components, (i) pools of homogeneous single-family loans with similar risk characteristics, (ii) pools of homogenous community bank
loans with similar risk characteristics (e.g., commercial real estate, construction and development, commercial, multifamily and consumer), (iii) individually significant loans that are
measured for impairment, and (iv) a component representing an estimate of inherent, but undetected, probable losses, which also contemplates the imprecision in the credit risk models
utilized to calculate the allowance.
Pools of homogeneous single-family loans with similar risk characteristics are assessed for probable losses based on loss migration analysis where loss factors are updated regularly
based on actual experience. The analysis examines historical loss experience and the related internal gradings of loans charged off. The loss migration analysis also considers inherent,
but undetected losses within the portfolio.
Pools of homogeneous community bank loans with similar risk characteristics (e.g., commercial real estate, construction and development, commercial, multifamily and consumer) are
assessed for probable losses hased 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, loss rates at selected peer community banks .and data. The analysis also incorporates the related internal 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 ..
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. Estimated fair value 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 the loan rate, or the market price of the loan. All loans considered impaired are included in nonperforrning loans. The Company
generally evaluates its residential loans collectivel? due t? nature. The component of the allowance for losses is a portion which represents the estimated
inherent but undetected probable losses, and the Impreclston m the credtt Tlsk models ulihzed to calculate the allowance. ThIS component of the allowance is associated with both
community bank loans and residential loans and is reflective of the overall real estate concentration in the portfolio, the Colorado real estate concentration the construction and
development portfolio, risks related to legacy brokered acquired loans, and negative factors in the oational housing market. '.
Loan losses are charged against the allowance when the loan or portion thereof is considered uncollectible. In the opinion of management, the allowance is adequate to absorb the
inherent losses in the current loan portfolio.
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 may be required that could materially adversely affect
earnings or our financial position in future periods.
9
2106
Table olContents
Community Bank LOBns
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 as assets held for investment. Currently, we intend to hold for the foreseeable future
or to maturity all community bank loans except SBA loans guaranteed portl?ns of 7a loans .. We generally elect to sell certain SBA 504 loans and the guaranteed
portions of SBA 7a loans. These sales assist the Company m managmg Industry concentratIOns and Interest rate nsk, and are a nonnal part of our operations.
Loans Held for Sale
Loans purchased or originated without the intent to hold for the foreseeable future or to maturity are classified as held for sale. Classes of loans held for sale are carried at the lower of
aggregate cost, net of discounts or premiums and a valuation allowance, or estimated fair market value. Estimated fair market value is determined as described in Note 15, "Fair Value of
Financial Assets." Net unrealized losses, if any, are recognized in a valuation allowance by charges to operations. SFAS No. 91, "Accounting for Nonrefundable Fees and Costs
Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases," which requires that discounts or premiums on loans held for sale be deferred until the related loan is
sold. The Company accretes discounts and amortizes premiums related to repayment of loan principal on its loans held for sale, which are included in interest income.
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 loan 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 including servicing assets and servicing liabilities. 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 uncollectible.
Loans Held for Investment
Loans which the Company has the intent and ability to for the foreseeable future until o.r payoff are classified as held for investment. These loans include community
bank loans (commercial real estate, commercial, construction and development, SBA ongmated, multifamily and consumer loans), SBA purchased loans, and wholesale residential loans.
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. In estimating other-than-temporary impairment losses, management considers, among other things, (i) the severity and duration of
the impainnent, (ii) the ratings of the security, (iii) the overall deal structure, e.g., the Company's position within the structure, the overall, near term financial performance of the
underlying collateral, delinquencies, defaults, loss severities, recoveries, prepayments, cumulative loss projections and discounted cash flows, and (iv) the intent and ability of the
Company to retain its investment in the security for a period of time sufficient to allow for any anticipated recovery in fair value. Management initially considers whether an investment
security is other-than-temporarily impaired under the guidance promulgated in FSP SF AS 115 and SF AS 124-1, "The Meaning of Other-Than-Temporary Impairment and Its Application
to Certain Investments" and the guidance from the Securities and Exchange Commission found in Staff Accounting Bulletin Topic 5M. If impairment is determined to be other-than-
temporary, an impairment loss is recognized by reducing amortized cost basis to fair Upon recognizing impairment loss, the Company applies Emerging Issues Task Force
("EITF') 99-20, "Recognition of Interest Income and Impalnnent on. BenefiCIal Interests and BenefiCIal Interests That Continue to Be Held by a Transferor in Securitized
Financial Assets," for applicable securities in each subsequent reportmg period.
10
2107
Table 0/ Confenls
We oelieve that current macroeconomic conditions have significantly impacted the fair value of the Company's securities portfolio. The Company's investment portfolio contains
several securities that have a severe decline in fair .value i? comparis.on to the amortized cost. securities, principally those in the available for sale portfolio, have been
downgraded by one or more of the nationally recogmzed agencies, However" Company s prepared cash flow forecasts support management's conclusions
that it is probable the Company will fully recover the amortized cost of the secu,ntles based that would be used by other market participants. Management's
conclusion that impairment is temporary is based upon several facto.rs. factors Include: credit duratIOn, and severity of impairment, management's intent and ability to hold
to recovery or maturity oased upon the classification of secun,?" mdependent cash flow eS,tlmates among others. These factors in certain circumstances involve significant
management estimates and support management's concluSIOns are te,mporary. In circumstances where these factors lead to a conclusion that impairment is other than
temporary, the security is written-down through a charge to earnmgs to Its estimated falf value. .
The effect the current macroeconomic conditions have on fair value is largely due to the risk-adjusted discount rates used to determine fair value. As permitted by SF AS 157, "Fair
Value Measurements," sucb rates are imputed and involve significant management judgment.
Income Taxes
The Company and its subsidiaries file consolidated federal and. state income tax re.ru':"s. 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 savmgs and loan for Income tax purposes: The consolidated effective tax rate was affected by the resolution of
uncertain tax positions the Company bad identified under FIN 48, tbe level ofutihzahon of New Markets Tax Credits and the level of tax-exempt interest income in proportion to the level
of net 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. Deferred tax assets are reduced by a valuation allowance when, in the opi,nion management, it is more likely than not that some portion or all of the .
deferred tax assets will not be realized. At September 30, 2008 and December 31, 2007, management beheved It was more likely than not that the deferred taxes would be realized and,
accordingly, there was no valuation allowance. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
When tax returns are filed, it is highly certain that some positions taken upon examination by the taxing authorities, while others are subject to uncertainty about the
merits of the position taken or tbe amount of the position be sustamed. The of tax position is recognized in the financial statements in the period during
which, based on all available evidence, management It IS more. hkely not the posll1on 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 ?nd not offset or aggregated with other positions. Tax positions that meet the
more likely thall not recognition threshold are measured the amount of tax benefit that IS more than 50 percent likely of being realized upon settlement with the applicable
taxing authority. The portion of the benefits associated With taken that the amount measured as described above is reflected as a liability for unrecognized tax
benefits in the accompanying balance sheet along with any associated IOterest and penalhes 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.
11
2108
Table orC()nfents
Fair Value Measurements
On January 1, 2008, the Company adopted SFAS No. 157, which defines fair value, establishes a framework for measuring fair value under GAAP, and expands disclosures about fair
value measurements. See Note 15, "Fair Value of Financial Assets" for the impact of adoption.
Cumulative Effect of Adoption of New Accounting Principle:
Endorsement Split-Dollar Lire Insurance Arraugements
On January 1, 2008, the Company changed its accounting policy and recognized a cumulative-effect adjustment to retained earnings totaling $226,000 related to accounting for certain
endorsement split-dollar life insurance arrangements in connection with the Issue ?64: "Accounting for Deferred Compensation and Postretirement Benefit Aspects of
Endorsement Split-Dollar Life Insurance Arrangements." ElTF 064 reqUires recogmtton of a hablhty and related compensation costs for endorsement split-dollar life insurance
arrangements that provide a benefit to an employee that extends to periods . .under EITF 064, life insurance policies purchased for the purpose of providing such
benefits do not effectively settle an entity's obligation to the employee. Accordmgly, the entIty must recognize a liability and related compensation expense during the employee's
active service period based on the future cost of insurance to be incurred during the employee's retirement. The Company accounts for the liability for future benefits in accordance
with Accounting Principles Board Opinion 12.
Reclassifications
Certain reclassifications have been made to the consolidated financial statements and related notes of prior periods to conform to the current period presentation. These
reclassifications had no impact on shareholders' equity or net income for the periods.
Impact of Recently Issued Accounting Standards
SFAS 160, "Noncontrolling Interest in Consolidated Financiol Statements, an amendment of ARB Statement No. 51. " SF AS 160 amends Accounting Research Bulletin ("ARB") No.
51 "Consolidated Financial Statements," to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary.
SPAS 160 clarifies that a noncontrolling 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 .. Among other SF AS 160 requires consolidated net income to be reported at amounts that
include the amounts attributable to both the parent and the noncontrolltng mterest. 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 noncontrolling interest. SFAS 160 will be effective for the Company on January 1,2009 and is not expected to have a
significant impact to the Company's financial statements.
SF AS 141R, "Business Combination (Revised 2007). " SFAS 141R replaces SFAS 141, "Business Combinations," and applies to all transactions and other events in which one entity
obtains control over one or more other businesses; SFAS 14lR requires an acquirer, upon initially obtaining control of another entity, to recognize the assets, liabilities and any
noncontrolling 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 tban 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 SF AS 141, whereby the cost of an acquisition was allocated to the individual assets acquired and liabilities assumed based on their estimated fair value. SF AS 141 R requires
acquirers to expense costs as incurred rather t.han allocating .such to the and as previously the case under SF AS 141.
SF AS 141 R also identifies related dIsclosure requtrements for busmess combmattons. ThIS Statement IS effecttve for busmess combmattons c10smg on or after January 1,2009.
SF AS 162, "The Hierarchy of Generally Accepted Accounting Principles. " SF AS 162 identifies the sources of accounting principles and the framework for selecting the principles to be
used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles ("GAAP") in the United
States (the "GAAP hierarchy"). The hierarchical guidance provided by SFAS 162 did not have a significant impact an the Company's financial statements,
12
2109
Table oICon/en/.
FASB Staff Position (FSP) no. EITF 03-6-1, "Determlnln.g Whether In Transactions Securities." FSP EITF 03-6-1 provides
that unvested share-based payment awards that contam non-forfeitable fights to dividends or dividend (whether paid or unpaid) are participating securities and shall be
included in the computation of earnings per share pursuant to the two-class method. FSP EITF 03-6-1 will be effective on January I, 2009. All previously reported earnings per share
data will be retrospectively adjusted to with the provisions of FSP EITF 03-6-1. FSP EITF 03-6-1 is not expected to have a significant impact on the Company's financial
statements.
1, Net Income Per Share
The following table sets forth the amounts used in the computation of net income per .are and net income per share assuming dilution:
Quarter Ended September 30, Nine MontbsEnded September 30,
1008 . 1007 1008 1007
(Dollars In thousands)
3 • .Investment Securities
Investment securities available for sale were as follows:
September 30,1008 December 31,1007
Gross Gross Gross Gross
Amortized Unrealized Unrealized Carrying Amortized Unrealized Unrealized Carrying
Cost Gains Losses Value Cost Gains Losses Value

'4
Mortgage-backed securities -
private .
43,253
CbP
··· ..
13
2110
Table of Contents
Investment securities held to maturity were as follows:
September 30, 2008 December 31, 2007
Estimated Fair
At September 30, 2008 and December 31, 2007, substantially all of the Company's investment securities were pledged to secure public deposits, FHLBank borrowings, repurchase
agreements and for other purposes, as required or permitted by law.
The followiog table presents information to 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 contmuous loss posItIon as follows:
September 30, 2008 December 31, 2007
Less than 12 months 12 months or more Less than 12 months 12 months or more
Estimated Fair Unrealized Estimated Fair Unrealized Estimated Fair Unrealized Estimated Fair Unrealized
Value Value Value Value Losses
The mortgage-backed securities written-down due to other-than-temporary impairment in the third of 2008 consisted of two nonagency collateralized mortgage obligations. The
securities deemed other-than-temporarily impaired were included in mortgage-backed securities - private, held to maturity, with an amortized cost of$9.4 million. The.estimated market
value of these securities was $5.3 million, representing an aggregate decline in value 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 performed in accordance with their terms, the securities were other-than-temporarily impaired based on the extent and duration of
the decline in market value below amortized cost, giving consideration to current illiquidity in the marketplace and uncertainty of a recovery of expected future cash flows. The securities
were written-down to their estimated fair values at September 30, 2008 and the impairment write-down totaling $4.1 million was charged to third quarter noninterest income.
At September 30, 2008, the net unrealized loss in the $110.7 ,:nillion. At 30, 2008, based on the amortized cost and the lowest rating assigned, which in
many cases results in another higher rating, the securItIes portfolio conSIsted *' agency 60% AAA rated nonagency securities, 13% AA rated securities, 9% A rated
securities 6% BBB rated securities and 6% below investment grade rated secUritIes. Included ID the mortgage-backed securities - private, available for sale, were securities that are
collateralized by payment option adjustable rate mortgages. These securities which have. an. amortized cost of million, have received one or more ratings declines by the ratings
agency since acquisition. However, payments are current, and though the length of decllnels 12 months ID absolute terms, the relative declines have occurred for approximately
two quarters. Management has analyzed these apnd our approac"h t? that analysl.s IS in Note I of and Significant Accounting
Policies _ Temporary vs. Other-Than-Temporary ImpaIrment, and Note 15 Value of FlDanc!al Assets. Based on our snalysls and our revIew of the independent analyses
performed by third parties on these securities and other securities in our portfolio, the Company believes the decline in fair value of securities deemed temporarily impaired is due to
current temporary conditions in the marketplace. At September 30, 2008, management expects full recovery as the securities approach their maturity date, or repricing date or if market
yield for such investments decline. .
14
2111
Table afConfents
In the event securities demonstrate additional deterioration an increase in defaults or loss that indicate the.Company will not recover its anticipated cash flows or if the
duration of relatively significant impairments in these secunltes does not reverse, the Company will lDcur other-than-temporary impairments, which may result in material charges to
earnings in future periods. .
4. Loans Held for Sale
Loans held for sale consist ofthe following:
bank loans:.
.•
Multifamiiy . . .
••.

.'
Residential
"
Fair adjustment
•..•··•. :·.
Activity in tbe allowance for credit losses on loans held for sale is summarized as follows:
...
Provision for credit losses
.............. .
Recoveries
15
2112
September 30,
1008
December 31,
2007
(Dollars in thousands)
Nine Months Ended
September 3D, September 3D,
1008 2007
(Dollars in thousands)
··.7,+3$$'····· .
(43) ....
(44i)
1 .
. '''''$ .,.",.......,.,.,..".1 ....

211
(8S)'
. ":3

Tobie of Contents
S. .LoaDl Held for
Loans held for investment consist of the following:
c;ommunity bank loans:
Activity in the allowance for credit losses on loans held for investment is summarized as follows:
The following lists related to nonperfonning loans held for investment and held for sale:
September 30, December 31,
1008 1007
(Dollars in thousands)
Nine Months Ended
September 30, September 30,
September 30,
1008
1007
December 31,
1007
.... ,.-.:' .. , •... ,: ...• :'." .••... ,;: ... :.'.. : .. , .. '.' .. :.:,.' ... ' ..... : .. ', •.. : ...•... :.,:.:.,; ••.' .. ' ...' ... <.'.':.,:... ... :, ...... : ...•. : ....•.. ':." ... :,i •... ,:.:: ••. : .. ..: .....•.. ' •••....• ' .... ;: .•...:.: .. :.', .•. ,; .. , •.• . .... :t:.:: .. : .... :.:, •. : ...,.?,.w.,:.:.: .. ·::., .' •... ·.' ...• ,' .. :.:.' ..: ... '.:.·:t.;c· .. ..•. ,:.,: •. •. ...••. , .. ': .• ;, .. :: ..•• .•. ::.'.: .•••. :.; .• : •. , .•. ..• :' •. ;, .• :.'.,: ••. ' .. ,.:.,.'; •• :', .. .. ;: .•...•..•.•••• .••.• : .. ,.• .. :,: .• '., •. ..... , ••'.:, •.•• : ••..... :: .• (,': ..:., .....•. ::'.,:.' •.. ;.".'.,:' .•.•. ,' •. : .... :., .. : •.• '.: ••.. : ..• : .....•.••.•... :.:., •• ': .. ':': ..••...... : •• : •.. ,•.•. :, ..•..• : ...•... , .. : .... ,•••. ':' .•••.•...•.. : •...•....• •••• ' .•.. ::.:::.: ••••i' .•.. : ..•.•..•. :::! ...·h,.:: ... :., ... : .... .... : ... ....... ,u .• .... ":. .. : ... ' ... : .... :".,.
.'. . " .. ' ....... i v ,. .:" •• ••
The aggregate .unpaid principal balance of loans that were past 90 or more days was $8.3 million and $S.4 million at September 30, 2008 and
December 31, 2007, respectively. These accrumg loans are not mcluded m the balances of nonperfonDmg loans above.
16
2113
Tallie of Contents
Included in nonperforming loans were impaired loans, as defined under SFAS No. 114, "Accounting by, Creditors for Impairment of a Loan," totaling $4,341,000 and $0 at September 30,
2008 and-December 31, 2007, respectively, eacb of which loans has a valuation allocated to It. All of the loans deemed impaired were evaluated using the fair value of the
collateral as tbe measurePlent method. The related allowance allocated to Impaired loans was $1,856,000 and $0 at September 30, 2008 and December 31, 2007, respectively. There was no
interest recognized in the periods on loans while they were considered impaired.
6. Mortgage Servlclng Rights
The activity in the mortgage servicing rights is summarized as follows:
Nine Months Ended
September 30, September 30,
1008 1007
(Dollars in thousands)
The estimated fair value of mortgage servicing rigbts at September 30, 2008, was $10,249,000. The Company determined fair value in accordance with SFAS 157. See Note IS "Fair Value
of Financial Assets" for a discussion oftbe fair value determination.
During the nine montbs ended September 30, 2008 and 2007, the Company recognized originated mortgage servicing rigbtsof $150,000 and S51,OOO, respectively. Tbe amounts of
originated mortgage servicing rights 2008 and we.re tbe result of tbe. of tbe. portions of originated 7a loans collateralized by mortgages. The
mortgage servicing rights were determIDed based upon the relative fair value of the servlcIDg asset ID companson to the guaranteed portion of the loan sold; the unguaranteed portion
retained, and the servicing asset. -
The Company's servicing (excluding subserviced loans), is comprised of the following:
September 30,1008 December 31,1007
Number
of Loaus
Prlnctpal Prlnctpal
Balance Number Balance
Outstanding of LoaDll Outstanding
The Company's custodial-escrow balances shown i.n accompanying consolidated balance at September 30, 2008 and December 31, pertain to payments held in escrow in
respect of taxes and insurance and the float on and Interest payments on loans serviced and owned by the Company. The custodial accounts are maintained the Bank in
noninterest-bearing accounts. The balance of custodial accounts fluctuates from month to month based on the pass-through of tbe principal and interest _payments to the ultimate
investors and the timing of taxes and insurance payments.
17
2114
Tabh' oj Contents
7. Deposits
Deposit account balances are summarized as follows:
.• ·.·,,·.·••·•·••··.·····
NOW and DDA accounts

Subtotais" ....
Ceh1fi(:ljfeij¢countl; ..
Tot;\ deposits
September 30, 2008
Amount Percent
The following table presents concentrations of deposits at the Bank for the periods presented:
............. .
Matrix Financial Solutions, Inc.
..... .
Other Deposit Concentrations
December 31,2007
Weighted
Average
Rate Amount Percent
September 30,
2008
December 31,
2007
(Dollars in thousands)

216,656 236,435
185;Q16
529,206 . 478;575 .
..

97.84
··.····.·H6
100.00%
Weighted
Average
Rate
':1:94%
0:47
.
1.32
., 4,Zt····
1.05%
Sterling Trust Company _ represents fiduciary assets under administration by Sterling, a wbolly owned subsidiary of the Company, that are in NOW, demand and money market
accounts, Included in this balance at Sterling is a series of accounts for one life settlement agent for special asset acquisitions and administration with a balance of $53 310 000 and
$103,830,000 at September 30, 2008 and December 31, 2007, Management elected to restructure this and certain elements of business ;espect to
this large life settlement agent account. The restructured relatIOnship will now allow the Company to pursue busmess m the same mdustry on a non-exclusive basis. During the nine
months of 2008, approximately $51 million of these deposits were withdrawn. Through Sterling'S marketing efforts, growth in new accounts and the increase in uninvested cash in
existing accounts offset $18 million of the withdrawn deposits. If Sterling cannot continue to replace this business with deposits from other clients, tbe aggregate deposits directed to
the Bank by Sterling could decline further in 2008. .
Matrix Financial Solutions, Inc. ("MFSI") - represents customer assets under administration by MFSI that are in NOW and. money market accounts. Tbe Company owns an approximate
7% interest in MFSI, whicb is accounted for using the cost metbod,
. .
Legent Clearing, LLC _ represents institutional deposits received through Legen! 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.
Other Deposit Concentrations - represents deposit funds from three institutional relationships maintained by the Bank as of September 30, 2008 and December 31, 2007. Included in .
otber deposit concentrations is one institutional relationship with balances of$507,208,000 and $455,862,000 at September 30,2008 and December 31, 2007, respectively.
Included in certificate accounts are approximately $35,000,000 and $13,025,000 of broke red deposits as of September 30,2008 and December 31, 2007, respectively.
18
2115
Table 0/ Content.
The aggregate amount of certificate accounts with a balance of $100,000 or more (excludiJig brokered deposits) was approximately $36,075,000 and $12,006,000 at September 30, 2008 and
December 31, 2007, respectively.
8. FBLBank Borrowings
The 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 DaUas. Certain long-term borrowings that exialed at that time with FHLBank ofDaI1as
are still outstanding under their origiJllli terms.
The balances ofFHLBank borrowings are as follows:
Available unused borrowings from FHLBank ofTopeka totaled $214,820,000 at Septeoiber 30, 2008.
9. Borrowed Money
Borrowed money is summarized as follows:
September 30,
2008
December 31,
2007
(Dollars in thousands)
September 30,
2008
December 31.
2007
(Dollars in thousands)
The Company's $30 million revolving line of credit to a third-party financial institution is for general corporate purposes. The Company must comply with certain financial and other
covenants contained in the credit agreement an.t0ng othe.r .things, the by the Bank of specific asset quality ratios, and ''well capitalized" regulatory capital ratios.
Also, the credit agreement limits the Company's ablhty to Incur addItional debt above specIfied levels.
Assets sold under agreements to repurchase are agreements in which the Company acquires funds by selling securities to another party under a simultsneous agreement to repurchase
the same securities at a specified price and date. The 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 mto repurchase agreements and also offers a demand deposit account product to customers that sweeps their balances in
excess of an agreed upon target amount into overnight repurchase agreements. . .
19
2116
Table of Contents
The Company structured repurchase agreements at September 30, 2008 are as follows:
Counterparty

Base interest rate
JP Morgan IP Morgan
>$.:. .
4.97% 2.59%
Citigroup

4.49%
.
December 28, 2008 November 21,2008

Call date
November 21, 2008 .
The two structured repurchase agreements ,:"ith IP Morgan .Chase Bank, N.A. embedded 1100r optio.ns. These result in a cost of this debt for the first two years of the'
lesser of the base interest rate of the borrowmg, or the base mterest rate of the borrowmg mmus the amount, If any, by which three-month LIBOR is less than the strike price set forth in
the agreements; however, the rate may not faU below zero.
10. Junior Subordinated Debentures Owed to Unconsolidated SUbsidiary Trusts
Under prior management, the Company three that as of 30: These trusts were formed for the purpose of issuing
corporation-obligated mandatorily redeemable capital secuntles (the capItal secuntles ) to third-party IDvestors and IDvestmg the proceeds from the sale of such capital securities
exclusively in junior subordinated debt of the Company (the "debentures"). The debentures. held by each 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 bemg 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 entered into agreements which, taken collectively, fully
and unconditionally guarantee the capital securities subject to the terms of each of the guarantees.
The following table presents details on the junior subordinated debentures owed to unconsolidated subsidiary trusts at September 30, 2008.
..•
AJiIoulltoftrtlstpreferred issued

Maturity........., ... '. " .... '.. . ,... , .••.. ,
J,)a!el'ffiilit.reciemptioir, •.... i ... •. , ... ;i; .. ·.' .. '
.' .,., .' ...... '.' ',' ...•........
lupil'[ ..
Rate subordlnateddeferrabieinterest
11. Regulatory Matters
Trust II Trust VI

.. ,.. . ...••..
. . 'ii,oOo $ 10,000'$
'i ......• ''''6.43%
June 8, 2031 . October 18, 2034'
.. $lli:Je8,2()1l'
. 400 $ 310 $
l $()
Trust VIII

7,500
. 5;86"10
July 7, 2035 '.

232


The Company. The Company is a unitary thrift.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 actions by regulators that, if undertaken, could ?ave a material effect on the Bank's and the Company's consolidated financial
statements. Under capital adequacy gUldebnes 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 commitlnents 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.
20
2117
Table 0/ Contents
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 I
capital (as defined in the regulations) to assets in of Tier I capital in the regulations) to total assets (as defined in the
regulations). The Bank's Tier I capital consists of shareholder s equity excludmg unreahzed gams and losses on secunties avallable for sale,less a portion of the Bank's mortgage
servicing asset that is disallowed for capital.
The Tier I and total capital ratios are calculated div.iding the respective amounts by .assets .. assets are calculated based on regulatory
requirements and include total assets, allocated by nsk weight category and certam Items (prlmanly loan commitments). The leverage ratio is calculated by dividing
Tier I capital by adjusted total assets.
The Bank bas been notified by the OTS that, as of its most recent regulatory examination, it is regarded as well capitalized under the regulatory framework for prompt corrective action.
Such determination has been made based on the Bank's Tier I, total capital, and leverage ratios. There have been no conditions or events since this notification that management
believes would change the Bank's categorization as well capitalized under the aforementioned ratios.
Actual
Amount Ratio
For Capital
Adequacy Purposes
Amount Ratio
(Dollars ilt thousa/tds)
To Be WeD Capitalized UmJer Prompt
Corrective Action Provisions
Amonnt Ratio

21
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12. Stock-Based Compeasatlon
Stock Options
A summary of the Company's stock option and non-vested stoCk awards activity, and related infonnation is as follows:
Nine MODths Ended September 30, 2008
Non-Vested Restricted Stock Awards
OutstaDding Stock OptiODS OutstaDding
Welgbted Welgbted
SbaresAvaHable Number or Average GraDt- Number or Average Exercise
for Grant Sbares Date Fair Value Sbares Price
;':,,'J;;t( ;'lr,::
"";,,,;;,' " r':';;;':
Exercised
"" •.
Balance September 30, 2008 1,040,012 104,680 $ 13.92 1,024,476 $
The shareholders approved the 2007 Equity Incentive Plan (the "2007 Plan"). at the 2007 annual meeting, which provides a variety of long-tenn equity based incentives to officers,
directors, employees and other persons providing services to the Company. The 2007 Plan authorizes the Compensation Committee to grant options as well as other forms of equity
bailed incentive compensation, such as restricted stock awards, stock appreciation rights, perfonnauce units and supplemental cash payments. At September 30, 2008,there were
104 680 non-vested restricted stock awards outstanding. These awards vest 20010 annually on the anniversary date of the grant over a five-year period. Based on an assumed level of
forfeitures the Company anticipates these awards will result in 'approximately $1.6 million of compensation expense over the vesting period of the restricted stock, with approximately
$1.3 remaining to be expensed ratably over the vesting period. This unrecognized expense is expected to be recognized over 4.0 years.
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
prior stock option plan. As of September 30, 2008, 3S6,128 shares have. beeD granted under the 2007 Plan, net of forfeitures, which included 233,498 options, 113,S69 restricted stock
units and 9,061 shares issued to independent members of our board of directors. Thus, of the 1,000,000 shares authorized under the 2007 Plan, there were 643,872 shares available for
future grants.
The fair value of each stock option award is estimated on the date of grant using the Hull-White model, an enhanced trinomial lattice-based model, which takes into account certain
dynamic ailsumptions about interest rates, expected volatility, expected exercill;C patterns, forfeitures and other factors. Expected volatility is based primarily on
historical volatility of the closing price of the Company's common stock. The nsk-free mterest rate IS based on the U.S. Treasury yield curve in effect at the date Of grant with a tenn
equal to the life of the option. The expected n:nn of options granted is using the and represents the period of time that options granted are expected to be
outstanding and ppst-vesting et:itployee behaVIor by group of employee. ForfeItures are estimated outsIde of the Hull-White model based on attrition studies perfonned annually. As
'the Board has declared regular $0.06 quarterly dividends, these are considered in the. option valuation. The weighted-average fair value of options granted during the nine months
ended September 30, 2008 was $3.04 per share. The intrinsic value of outstanding options at September 30,2008, was $0. Outstanding stock OptiODS have a weighted average remaining
contractual term of7.9 years, and future compensation expense associated with those options is approximately $2.4 million. The remaining expense is expected to be recognized over the
weighted average period of 2.8 years. Options outstanding and exercisable were granted at stock option prices that were Dot less than the fair market value of the common stock on the
date the options were granted and no option has a tenn in excess of ten years. Employee options vest ratably over a five year period.
22
2119
Table of Conlents
The following pre-tax amounts expensed and weighted-average assumptions were used to estil1!ate the fair value of options granted during the periods:
Nine Months Ended
September 30, 2008 Seetember 30, 2007

Weighted average grant date fair value $ 234 - $4.27 $ 4.04 - $ 5.51
Bmployee Stock PurchllSe Pili"
The Company has an employee stock purchase plan ("ESPP"). As of September 30, 2008, there were 171,639 ESPP Shares available for future issuance. The price at which ESPP Shares
are sold under the ESPP is 85% of the lower of the fair market value per share of common stock on the enrollment date or the purchase date. It is presently estimated that 18 897 shares
, will be issued through the ESPP for 2008. The expenses associated with such share-based payments were $18,000 and $30,000, for the quarters ended September 30, 2008 and September
30, 2007, respectively, and $66,000 and $73,000 for the nine months ended September 30, 2008 and September 30, 2007, respectively.
Stock RepurchtlSe Pia"
At September 30, 2008,there were 265,01 8 common shares authorized for repurchase by the Company's Board of Directors; however, at this time the Company has no further plans to
repurchase additional shares of its common stock.
13. Income Taxes
Income tax expense was as follows:
Nine Months Ended September 30, '
2008 2007
The Company's ,effective tax rate for the nine months ended September 30, 2008 and 2007 is below the statutory tax rate due to (i) the $4.1 million other-than-temporary impairment
charge discussed above in Note 3, "Investment Securities;" (ii) Credits, ,,:hich deployed at a subsidiary of the Bank, which were $889,000 and
$838,000 for the nine months ended September 30,2008 and 2007, respectively; (III) resolution of uncertain tax posItions due to a lapse of the statute oflimitations, which resulted in a
reduction of current income tax expense of $694,000 and $470,000 for the nine months' ended September 30, 2008 and 2007, respectively; and (iv) by tax exempt earnings, which
principally relate to income from bank owned life insurance.
At September 30, 2008 the Company has accrued $447,000 related to unrecognized tax benefits. This amount is accrued in other liabilities in the consolidated balance sheet
Interest and Penalties associated with the liability for unrecognized benefits is approximately $200,000 at September 30, 2008, and is included in other liabilities in the consolidated
balance sheet.
23
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Table of Contents
14. Segment Information
Under SFAS No. 131, "Disclosures About Segments ofan Enterprise and Related Infonnatioo," the Company has four reportable segments: (i) a community banking subsidiary, (ii) a
custodial and advisory services subsidiary, (iii) a mortgage banking subsidiary, and (iv) a The remaining subsidiaries are included in the "all others" category
and consist primarily of the parent company operations. The Company's segments are more fully descnbed ID Note 2 the audited financial statements in the Company's Form IO-K for
the year ended December 31, 2007.
Revenues from external customers:
15. Fair Valae of Fiaanelal Assets
Community
Bankhlg
Cnstodlal and
AdVisory Se"iees
Mortgage
Banking Broker Dealer AIlOtbers Total
(Dollars in thousands)
Effective Ianuary I, 2008, the Compsny adopted tbe provisions of SFAS 157, "Fair Value Measurements," for financial assets and liabilities. In accordance with Financial Accounting
Standards Board Staff Position (FSP) No. 1 S7-2, "Effective Date of F ASB Statement No. 157," the Company will delay application of SF AS 157 for nonfinancial assets and nonfinancial
liabilities, until January 1,2009.
SF As 157 defines fait value as the price that v(.ould be received, to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date. SF AS 157 establishes a fair value hierarchy that prioritizes the use of inputs used in valuation methodologies into the following three levels:
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 vallie and shall be used to measure fair value whenever available.
24
2121
Table of Conlenls
Level 2:
Level 3:
Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets; inputs to 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. .
Inputs to the valuation methodology are unobservable and significant to the fair value measurement. Level 3 assets and liabilities. include financial'
instruments whose value is determined using discounted cash flow methodologies, as well as instruments for which the determination of fair value requires
significant management judgment or estimation. . ..
A description of the valuation methodologies used for instruments measured 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 coslor fair value effective January 1,2008,
In general, fair value is based upon quoted market prices, where available. If such quoted market 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 made to ensure that financial instruments are recorded at
fair value or the lower of cost or fair value. These adjustments may include unobservable parameters. Any such valuation adjustments have been applied consistently over time. The
Company:s valuation methodologies may produce fair value that not be indic.ative of, net realizable value ?r. reflective of futun: fair values as of 30, 2008.
While management believes the Company's valuation methodologies are appropnate 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. One of the more subjective inputs to fair value in inactive
markets is the risk-adjusted discount rate utilized in the fair value calculation. Management has used risk"adjusted discount rates reflecting the current illiquid markets over the expected
life of the securities, which we believe is appropriate yet conservative. . .
Available for sale. securities . Securities available for sale are comprised of agency securities, nonagency securities (private label) collateralized mortgage obligations, and nonagency
securities collateralized by payment option adjustable rate mortgages. The Company reports its agency securities at fair value using Level 1 inputs. Management believes Level I is
appropriate for agency securities due to the relative availability of such securities in the marketpl.ace. The source of pricing for agency securities is .the
independent pricing service utilized by the FHLBank Topeka. The pnclDg semce utilized by FHLBank Topeka considers observable data that may IDclude dealer quotes, market
spreads, cash flows, U.S. government and agency yield curves, live trade speeds, credit information and the security's
terms. and conditions, among other factors. Management compares the pnclDg of Its agency secunties to pnclDg receIVed from another third party for reasonableness.
The Company reports its nonagency collateralized m?rtgage at value using L:eyel2 'inputs. Management believes Level, 2 is appropriate for these securities because the
Company obtains fair value measurements from an IDdependent ,I»:IClDg semce that was utilized the FHLBank to the collateral of such securities in the
borrowings obtained by the Bank. Management compares the pnclDg of these nonagency collateralized mortgage obligations to pnclDg from another third party for reasonableness.
Management reviews the reasonableness of the prices by calculating the yield implied by the price received to other mortgage-backed securities and agency mortgage-backed securities
among other factors. From the yields, ratings, performance and other factors related to the securities, management concluded the prices received had properly considered the credit risk
and liquidity risk associated with the instruments in light of current conditions in the marketplace., ..
The Company reports its nonagency securities collateralized by payment option adjustable rate mortgages using Level 3 inputs, Level 3 is appropriate for these securities because the
Company uses a cash flow forecast that incorporates elements of market participants upon a developed by an independent third party. The fair value measurements
considered, in addition IQ the data descnbed above for nonagency collateral mortgage obligation secunties, other factors such as constant default rate and loss severity levels. The
valuations are significantly impacted by the risk-adjusted discount rate utilized. This discount rate comes from a matrix developed by the third party and is based upon the rating
agency assigned rating, the overall del,inquency levels of the together spreads for i?struments takin,g into account both credit and liquidity as
well as the performance of the underlYlDg loan The faIT value estima,tes are upon of antic!pated future delinquency levels and loss severity levels, as
well as historical and estimated prepayment rates, SenIOr members of the Bank s Asset Liability meet With the third party that developed the model and discussed the inputs
and valuations derived. OUr review encompasses the factors discussed above, as well as other details of the underlying loans that comprise the securities including cumulative losses,
culrent delinquency levels, geographic concentration, original FICO, original loan to value ratios, extent of loan origination documentation (Le, full or limited) and loan size.
Management properly considered lack of liquidity in valuations obtained based on prices received relative to other securities and based on the discount rates used to discount the cash
flows which considered credit risk and liquidity risk of these instruments. We also compare the results to information available fro!ll other sources including various research reports,
reports, and market dsta obtained publicly and through subscription and found the conclusions to be appropriate.
25
2122
Table of Contents
Residential loans held for sale. Residential loans held for sale are in the aggregate at the 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 data that may loan type, spreads for other whole loans and mortgage-backed securities,
prepayment speeds, servicing values, and index values. Management makes certam adjustments to.the data mputs that we believe other market participants would in estimating the fair
value of the Company's residential held for sale portfolio including: of guarantees, seasoning, loan to value ratios, and FICO scores, among other
factors. During the third quarter ended September 30, 2008, the Company IDCurred an addItiOnal Impairment of $245,000 that was charged to earnings to reduce the carrying value of
residential loans held for sale to fair value. The remaining change in value from June 30, 2008, when the balance was $229,243,000, was due to repayments 0($10.6 million and $1.1 miUion
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 engages an independent third party to perform a
valuation of its mortgage servicing rights periodically. servicing are in with SF AS 140 using discounted cash flow modeling techniques tbat require
management to make estimates regarding future net sefVIcmg cash flows, takmg IOto and expected mortgage loan prepayment rates, discount rates, servicing costs,
and other economic factors. Certain adjustments to inputs are made to the specific characteristics of the Company's portfolio. During the third quarter ended September 30, 2008,
the change in value of the asset versus JUl)e 30, 2008, was due to amortization.
Impaired loans. Certain impaired loans are raported at the fair value of the underlying collateral if management concludes repayment iii expected solely from the collateral. Collateral
values are estimated using Level 2 inputs based O? observable market or 3 inputs based on discounting During the quarter ended September 30, 2008,
impaired loans were remeasured and reported at falf value through a specdic a1lowan.ce allocahon of the allowance for credIt losses based upon the fair value of the underlying
collateral. Impaired loans with a carrying value of $4.4 million were reduced by specific valustion allowance allocations totaling $1.9 million to a total reported fair value of $2.5 million
utilizing Level 3 valuation inputs. The increase in balance of impaired loans In the third quarter is due to residentinlloans.
Impaired securities. 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 because the Company relies upon a valuation. of usi?g.a ca:'h flow forecast model incorporates elements of market participants prepared by an
independent third party. The methodology used to detemune estimated falf value IS IdentIcal to the methodology dIscussed above in Available for sale securities and that is subject to
the same levels of review.
26
2123
Table o/Contenls
The top portion of the table below presents the balances of assets at fair value on.a recurring basis and the bottom portion of the table below presents assets measured at fair
value on a nonrecurring basis as of September 30, 2008 (there are no habJiltles measured at fair value):
Description
Quoted Prlees (u
Aetlve Markets
for Ideutleal
Assets
(Levell)
Sigumeant
Siguilleaut Other Unobse"able
Obse"lb1e Inputs lupllts
(Levell) (Level 3)
(Dollars in. thousands)
Total
FairV.llle
.... ii·; .. ,.,' ·;"."""'ii:{ i:;,';:,; /:r." '. '1' ., .. '., ..... ',"'i'" .. :.',",' , .. " .
it;.: .:;:i:t i •. ::;;; .... .. ·i.
6iIier-ihan-temporarily Impaired securities S,lOS 5,305
A reconciliation of available for sale securities, which requires significant adjustment based on unobservable data is presented below:
Fair Value Measurement
Usmg Significant
Unobservable Inputs
(TransferS'to Level 3)
Available for sale Securities,
recurring basis
•.. , ..........•. ' ." .. ,.. (Dollars in thousands)
':';D1'2:.E;;;.::,lt'G;':0i:;!friq:;1I;it:
i
;'!;'.:;;}2i:;';;".I'Q('ii;:'ti £;;[!.;. '''',i:':Lr'j;!li
7
}",iI
Transfers into Level 3 16,658
.. ",),;j;;':,i· ' ... .,',:
During the nine months there were no transfers oui of Level 3 financial assets.
16. Commitments Ind Contingencies
Commitments
The Company is a party to credit-related iitstruments with sheet risk the course to meet the financing needs of its customers. These financial
instruments include commitments to extend credit and standby letters of credit. Such comrrutments mvolve, to a varymg degree, elements of credit and interest- rate risk in excess of the
amount recognized in the consolidated balance sheets.
A summary oflbe contractual amount of significant commitments follows:
27
2124
September 30,
1008
December 31,
1007
(Dollars in thousands)
Table Contents
The Company's exposure to credit loss, in the event of nonperformance by the other party, to off-balance sheet financial instruments with credit risk is represented by the contractual
amounts of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments with credit
risk.
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. Such
instruments generally have fixed expiration dates or other terminat!on clauses and may 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 necessanly represent future cash reqUIrements. The Company evaluates each customer's creditworthiness on a case-by-case
basis, and the of collateral or other security obtained is based on management's credit evaluation of the customer.
Standby letlers of credit are conditional commitments issued to guarantee the a customer to a third party. Standby letlers of credit generally are contingent upon the
failure of the customer to perform according to the terms of the underlymg contract With the third party.
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 the Company's business.
The Company accrues liabilities when it is prohable costs ,":ill be .incurred ?nd can be estimated. Such accruals are based upon developments to date, the
Company's estimates of the outcome of these conteSti.ng, hltgatlng and settling other Because the outcome of most litigation matters is iilherently
uncertain, the Company will accrue a loss for a pendmg hltgatlOn matter Ifthe loss IS probable and can be reasonably esttmated. Based on evaluation of the Company's litigation matlers
and discussions with external legal counsel, management believes that an adverse outcome on the matters noted in the Company's Annual Report on Fonn 10-K, against which no
accrual for loss has been made at September 30, 2008, is reasonably possible but not probable, and that the outcome with respect to one or more of these matters if adverse is
reasonably likely to have a material adverse impact on the consolidated financial position, results of operations or cash flows of the Company. "
The legal contingencies of the Company are more fully described in the Company's Form IO-K for the ended December 31, 2007 under Item 3. Legal Proceedings and in Note 21 to
the audited financial statements. During the nine months ended September 30, 2008, there were no matenal changes to the infonnation previously reported except as disclosed below
and in Partll, Item I, Legal Proceedings.
Sterling. Heraclio A. Munoz, et 01. v. Sterling Trust Company, et; 01. pending in Superior Court of the State of California ("Munoz"). In this complaint filed in December 2001, plaintiffs
sought class action status for their claims alleging negligent misrepresentation, breach of duty and breach of written contract by Sterling. The Company and the Bank, along
with other unrelated parties, were also named as defendants. In the fourth quarter of 2005, Sterhng was granted summary judgment as to all claims against it by the plaintiffs. After the
order granting summary judgment was formally entered in April 2006, the plaintiffs filed an appeal in September 2006. In March 2008, the California Court of Appeals issued a tentative
order which affinned the trial court's decision granting summary judgment in favor of Sterling. The California Court of Appeals also awarded Sterling its costs on appeal. In
consideration of Sterling waiving its right to costs, the plaintiffs agreed not to file an appeal ofthe court's decision. This decision became final in April 2008.
Douglas Wheeler, et 0/. v. Pacific Air Transport, et al.: Paul C. Jared, et a/. v. South Resort and Spa, Inc., et 01.; Lawrence Rehrig, et 01. v. Caffe Diva, et 0/.; Merrill B.
Christman, et 01. v. Millennium 2100, Inc., et 01.; David M Venezia/e, et 01. v. Sun Broadcasting Systems. Inc., et 01.; and Don Glazer, et 01. v. Technical Support Servs., Inc., et 01.
Sterling was named a defendant in several class (.the '.'IRA fi.led in .in the District Court for the Western District of Pennsylvania
alleging that Sterling breached fiduciary dulles and was neghgent 10 each plamllff's self-directed mdlVldual reltrement account holding a nine-month promissory note. On
April 26, 2001, the court transferred all the IRA Suits t? the Western .Dlstnct where they were subsequently refe.rred to binding arbitration. The arbitration of the IRA Suits was
abated pending the outcome of the Munoz case descnbed above. the Cahfornla .of Appeals affinned th.e court's granting of Sterling'S motion for summary judgment
(thereby resulting in the dismissal of the Munoz matter as descnbed above), these arbitratIon cases have been dIsmissed with prejudice pursuant to the request of the plaintiff's
counsel. .
28
2125
Table 0/ COII,ents
Contingencies - G"flrtlnteeIJ
The Company maintains a liability related to its legacy mortgage banking operations at Matrix for I?sses on mortgage loans expected to be repurchased or on which
indemnification is expected to be provided. The Company regularly evaluates the adequacy of thIS repurchase hablhty based on trends in repurchase and indemnification requests
actual loss experience, and other relevant factors econ?mic conditions. Total loans repurchased during the months ended September 30, 2008 and 2007 were $456,000 and
$536,000, respectively. Loans indemnified that rematn outstanding at September. 30, $6,795,000, of which $2,421,000 are guaranteed as to principal by FHA. Losses net of
recoveries charged against the liability for estimated losses on repurchase and tndernnification were $481,000 and $35,000 for the nine months ended September 30,2008 and 2007
respectively. At September 30, 2008 and Decemher 31,2007, the liability for estimated losses on repurchase and indemnification was $1,320,000 and $1,650,000; respectively, and
included in other liabilities in the consolidsted balance sheets.
In connection with the May 2006 sale of ADS School Services, LLC, the Company and Equi-Mor Holdings, Inc., a wholly owned subsidiary of the Company, guaranteed, for a five year
period, the repayment of the loans sold to the pw:chaser up to an aggregate of creating a recourse obligation for the Company. During t1!.e third quarter of 2008, the
Company incurred $490,000 oflosses against its guarantee. The balance of the estimated habllity at September 30, 2008 and December 31, 2007, was $445,000 and $935,000, respectively,
and is included in other liabilities in the consolidated balance sheets.
17. Subsequent Event
Management's evaluation of securities that resulted in. the non-cash impairment write;cmwn . was on November 6, 2008. After completion of this
evaluation, the Company's Board of Directors elected to mcrease the capItal m the Bank and thus the Bank capItal ratios. Accordingly, on November 6, 2008 $6 million of additional
capital was injected into the Bank through a draw on the Company's revolving line of credit at another institution. '
Item 2. Management's Dilleussion and Analysill of Finanelal Condition and Results of OperatioDs
This disCussion and analysis of United Western Bancorp. Inc. :s financial condition and resll/ts of operations shollid be read in conjllnction with the consolidated financial
statements and notes thereto appearing elsewhere in this report. The words "tis •.. "we •.. the "Company" or similar terms refer to United Western Bancorp. Inc. and its wholly owned
slIbsidiaries IInless we indicate otherwise. The "Bank" refers to United Western Bank.
Fot'Wllrtl-Looking Stfllements
This Quarterly Report on Form IO-Q 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 Forward-looking s!Btements include information concerning our future resultS, interest rates, loan
and deposit growth operations, development and growth of our communIty bank network and our bUSlness strategy. Forward-looking statements sometimes include terminology such
as "may," "wiU," "C:Xpects," "anticipates," upredicts," "believes," "plans," "potential," "projects," "goal," "intends," "should" or "contin.ue" or the negative of any such
terms 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 guarant.ees of performance or results. They involve risks, uncertainties and that COuld cause
actual performance or results to differ materially from in the forward-iooklDg statements. These. factors include, but are not limited to: the successful implementation of our
community banking strategies and growth plans; the timlDg 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, and conditions specifically related to the financial and credit markets, competition, legal
and regulatory developments, and future risks snd unc.ertainties curre?tly to us;. concerning these and other factors that may cause actual
results to differ materially from those ID IS tn Risk Factors section Company's Annual Report on Fonn 10-K for the year
ended December 31, 2007 snd in the Companys other penodlc reports and fihngs WIth the snd Exchange CommtSSIOn. The Company cautions investors not to place undue
reliance on the forward-looking statements contained in this Quarterly Report.
29
2126
Table of Contents
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
7
100king Ibis Report the date on they are made 10 reflect subsequent events or circumstances, except as
required by law. Our risk factorS are discussed 10 greater detallln.Item IA. Risk Factors 10 the Company s Form IO-K for the year ended December 31, 2007, and in Item IA. "Risk
Factors" in this report.
Ove",lm
For the quarter ended September 30, 200S, nel income was million, a compared the quarter September 30, 2007. Diluted earnings per share were
$.21 for the third quarter of200S compared to $.37 for the third quarter of2007. The ongomg cnses In the finanCial markets and national economy resulted in further declines in the value
of certain securities in our investlnenl portfolio during the !hird The 54.1 million, pre-tax, other-than-temporary impairment occurred primarily as a result of conlinuing
weaknesses in the residential real estate markets and the resultlOg dechne ID fu!Dre cash flows for the affected securities. The portfolio remains substantially investment grade
and the remaining temporary declines in value are the result of the current market disruptions.
Net interest income before provision for credit losses increased by $3.2 million, or IS%, from the third quarter of 2007 10 the third quarter of 200S, as·. result of lower costs of interest-
bearing liabilities and from the continued execution of our community banking business plan. As a result, net interest margin increased 35 basis points to 3.99% for the third quarter of
200S, compared to 3.64% for the third Included for th.e third quarter of200,S 2007 were lower than normal effective tax rates. The lower tax rates occurred
due to the other-than-temporary impairment of IOvestinent secuntles and reductions of the Company s mcome tax expense of$694,ooo and $470,000, for the quarter ended September 30
200S and 2007, respectively, due to lapsing of the statute of of the related tax retums for previously identified uncertain tax positions. In the fourth quarter of 200S:
management anticipates an effective tax rate of29% to 32%, consistent With the first and second quarter of200S. .
Total assets at September 200S were .billion,. which an increase of $14S !",m 31,2007. Total bank loans, before the community bank
allowance for credit losses, IDcreBsed $349 mil!lOn t,he first Dine of 200S to 1:055 bllhon. Run-off of IOvestinent securities and wholesale loans partially offset the growth
of community bank loans. Total shareholders. equity by $13 $100.4 m!lhon at September 30, 2008, compared to $113.4 million at December 31,2007 due principally to
temporary impairments recognized in our available for sale IOvestinent securities portfoho as well as the other-than-temporary impairment charge recognized on two held to maturity
investment securities. This reduced our leverage ratio to 4.4S% .and our book value per share to $13 .90 at September 30, 2008, from 5.41 % and $15.6 I, respectively, at December 31, 2007.
The Company's loan portfolio asset quality continues to be satisfactory and, at September 30, 200S, is stable. Total nonperforming assets were $17.8 million at September 30,
2008 or .79% of total assets, compared to .65% at December 31,2007. At September 30, community bank loans were $6.2 million or .58% of the community bank
portfolio. Nonperforming residential loans increased modestly from year end, and were $S;2 million at September 30, 2008, compared to $7.9 million at December 31, 2007. The Company
believes its nonperforming asset ratios are reasonable versus peers and market averages.
In addition to the discussion below, readers may also want to review our earnings release for the ended September 30,2008, dated November 10,2008, which is posted on the
Investor Relations section of our website at www.uwbancorp.com. .'
Recent MIJ,ket Developments
The economy is experiencing significantly reduced business activity as a result of, among other factors, disruptions in the financial system during the past year. Declines in the housing
market during the pasl year, due to falling home prices and have resulted in substantial declines in mortgage-related asset values, which has
had a dramatic negative impact on govemment-sponsored entllies and· major commerCial and IOvestinent banks. .
30
2127
Table of Contents
Reflecting concern about the stability of the finance markets generally and the strength of counterparties, many lenders and institutional investors have reduced, and in some cases,
ceased to provide funding and liquidity to borrowers, ot.her. financial institutions. In response to the financial. crises the banking system and financial markets and
going concern threats to investment banks and other mstitullons, on Oct?ber 3, 2008, the .Economlc Stablhzation Act of 2008 (the "EESA") was signed into law.
Pursuant to the EESA, the U.S. Treasury will have the authority to, among other thmgs, purchase up to $700 bllhon of mortgages, mortgage-backed securities and certain other financial
instruments from financial institutions for the purpose of stabilizing and providing liquidity to the U.S. financial markets. .
On October 14,2008, U.S. Treasury Secretary Paulson, announced the Department of the Treasury will purchase equity stakes in a wide variety of banks and thrifts. Under this· program,
. known as the Troubled Asset Relief Program Capital Purchase Program (the "CPP"), the Treasury will make $250 billion of capital available to U.S. financial institutions in the form of
preferred stock from the $700 billion auth?rized by the EESA: Under the CPP, i? conjunction the Treasury is to receive warrants to purchase
cominon stock with an aggregate market price equal to 15% of Its preferred stock mvestment. PartiCipating financial institutIOns will be required to adopt the Treasury's standards for
executive compensation and corporate governance for the period during which the Treasury holds equity issued under the CPP.
Also on October 14 2008, SecretarY Paulson signed the systemic risk exception to the FDIC Act, enabling the FDIC to temporarily provide a 100% guarantee of the senior debt of all
FDIC-insured and their holding companies, as well as deposits in noninterest bearing transaction deposit accounts under a Temporary Liquidity Guarantee Program.
Coverage under the Temporary Liquidity is avai.lable for 30 days without charge and thereafter at a cost of75 basis points per annum for senior unsecured debt and
. 10 basis points per annum for noninterest-bearlng transactIOn depOSits.
It is not clear at this time what impact the EESA, the CPP, the Temporary Liquidity Guarantee Program, other liquidity and funding initiatives of the Federal Reserve and other agencies
that have been previously announced, and any additional programs that may be initiated in the future will have on the financial markets and the other difficulties described above,
including the extreme levels of volatility, limited cre.dit .availability currently being ot on the U.S. banking and financial industries and the broader U.S. and global
economies. Further adverse effects could have a negative Impact on the Company and Its busmess.
The Company is assessing its participation in ,!,e Temporary Liquidity G?arantee but not,YOt made a definitive decision as to whether it will participate. On November 7,
2008 the Company made application through Its regulator, of Thnft SuperviSion, to participate In the CPP. The Company plans to use its proceeds from the CPP, if received to
the capital ratios of the Bank and the Company and to prudently provide additional credit to customers in the markets we serve.
ComJHIrlson 0/ Reslllts o/OperadoM/or the Quarters Ended September 30, 2008 "nd September 30, 2007
Net Income. For the quarter ended September 30,2008, we earned $1.5 million, or $.21 per basic and diluted share, as compared to $2.7 million, or $.37 per basic and diluted share, for the
quarter ended September 30, 2007. The decrease in earnings was a result of the $4.1 million non-cash other-than-temporary impairment charge ..
Net Interest Income. The following table sets forth, for the periods and as of the dates indicated, information regarding our average balances of asaets and liabilities as well as the
dollar amounts of interest incorile from interest-earning assets and interest expense on interest-bearing liabilities and the resultant yields or costs. Ratio, yield and information is
based on average daily balances where available; otherwise, average monthly balances have been used. Nonperforming loans are included in the calculation of average balances for
loans for the periods indicatea.
31
2128
Table ofConfenf.
Volume and Rate Analysis o/Net Interest Income
Average
Balance
200B
Interest
Quarter Ended September 30,
Average Average
Rate Balance
(Dollars in thousands)
1007
Interest
Average
Rate
The following table presents the extent to which interest rates assets and !nterest-bearing liabilities have affected our interest income and
interest expense during the periods indicated. IS .provlded each WIth respect to.: (I) changes to in volume (changes in volume multiplied by
prior period rate), (ii) changes attributable to changes ID rates (changes In ra!es multlpbed by volume) and (III) changes attrIbutable to a combination of changes in rate and
volume (change in rates multiplied by the changes in volume). Changes attrIbutable to the comblDed Impact of volume and rate have been allocated proportionately to the changes"due
to volume and the changes due to rate.
32
2129
Table of Contents
Quarter Ended September 30,
1008 vs. 1007
Inerease (Deerease) Due to Change lu
Volume Rate Totill
(Dollars in thousands)
As detailed in the foregoing tables, net interest income before provision for credit losses increased $3.2 million, or 18%, to $21.0 million for the quarter ended September 30 2008 as
compared to $17.9 million for the quarter ended September 30,2007. Net interest margin increased 35 basis points to 3.99% for the quarter ended September 30, 2008 from 3.64% for'the
same period a year ago. The tables the increase in net interest .incom.e before for credit losses principally the result. of liability management as int!,rest expense
declined by $4.9 million between the periods. However, other factors, IDcludlDg our contlDulDg balance sheet transllion and new commuDlty bank loan production, also contributed to
the overall change in net interest income and the net interest margin between the income .declined $1.7 $29.2 million for the quarter ended September 30, 2008,
as compared to $30.9 million for the quarter September 30, 2007. verage commuDlty loans mcreased to $992 million for the quarter ended September 30, 2008, compared to
$578 million for the same quarter in 20?7. The on those 6.19% for the thud quarte.r of 2008, as to 8.45% in 2007. The decline in the yield on community
bank loans is consistent with the decline ID the prime rale of IDterest, to which many of our commuDlty bank loans are mdexed. At September 30, 2007, the prime rate was 8.25%
compared to 5.00% at September 30, 2008.
During the same third quarter periods, the average balance wh?lesale assets declined by $258 mill!on to 1.07 for the ended September 30, 2008, as compared to $1.33
billion for the quarter ended September 30, 2007. The decline ID the balance of wh"lesale assets IS consistent wuh management s strategy to reduce these assets. The reduction is
princ;ipally comprised of repayments from borrowers: The which in totl\l. have impact on our net m.argin, d.id perform relatively well in the third
quarter of 2008. The yield on wholesale assets 35 baSIS POIDts between. the periods, less. than the 226 baSIS pOIDt in the community banking assets.
Generally this was the result of loans that reached their mterest rate reset date and IDcreased relalive to earlIer periods, and also reflects that a slgDlficant portion of the interest rates on
single fam'ily loans reset annually, while a large portion of the interest rates in the community bank loan portfolio reset monthly or quarterly.
33
2130
Table of Conlents
Overall, the cost of liabilities declined 131 basis in the comparable quarters to 1.73% for the quarter ended September 30, 2008, versus 3.04% in ,2007, which contributed $4.9
million of interest expense savings. The average balance of il)terest-bearing liabilities increased by $166 million, principally in FHLBank borrowings and money market and NOW
accounts, which increased $91 million and $59 million, respectively, between the periods. The overall growth in interest-bearing liabilities was related to the growth in earning assets.
The increase in the average balances was, more than offset by declines in the related costs, as the costs of FHLBank borrowings declined by 157 basis points and the cost of money
market aod NOW accounts declined by 135 basis points between the periods. The decline in was, consistent with the decline in market interest rates between the periods. The
majority of average noninterest-bearing deposits and a significant portion of money market and NOW accounts are primarily institutional deposits that are subject to subaccouilting
fees.
For the quarter ended September 30, 2008, community bank loans accounted for 53% of our interest.income compared to 40% in the year earlier period. We expect that community bank
loans will continue to increase over time and that wholesale assets will continue to run off through repayment. Management would also consider possible sales of wholesale assets to
accelerate the transition of our balance sheet once the marketplace for financial instruments stabilizes. The Federal Open Market Committee has'reduced short-term interest rates 275
basis points since August 2007 through September 30, 2008, and an additional 50 basis points reduction occurred October 8, 2008. Through our Asset Liability Management Committee
we have maintained a very modest asset sensitivity to prospective changes in interest rates. Accordingly, without the continuing balance sheet transition, we expect our net interest
income could decline ifthe Federal Open Market Committee were to reduce short-term interest rates from existing levels.
Provision for Credit Losses. The provision for credit losses was $2.6 million for the quarter ended September 30, 2008, compared to 5352,000 for the quarter ended September 30, 2007.
The provision for credit losses in the third quarter of 2008 was the result of the million of grow",: net ?frepayments in our community bank loan portfolio during the period, an
increase of specific impairments of $767,000 in the aggregate for one construction loan and three reSidential loans, and approximately $600,000 related to other existing loans that
demonstrated signs' of weakness for which the loan grade was reduced. The provision for credit losses for the third quarter 2007 reflected the growth of nearly $81.4 million of
community bank loans offset by repayments of residential mortgage loans in the period and certain improvements in individual loan grades. For a discussion of the Company's
allowance for credit loss methodology see "Significant Accounting Estimates - Allowance for Credit Losses," and, as it relates to nonperforming assets, see "Asset Quality."
Noainterest Income. An analysi,,& of the components of non interest income is presented in the table below:
Quarter Ended September 30,
2008 2007 Dollar Cbange Percent Cbange
(Dollars in thousands)
Custodial, Administrative and Escrow Services. Service fees increased 5392,000, or 18%, to 52.5 million for the quarter ended September 30,2008, as compared to $2.2 million for the
quarter ended September 30, 2007. The increase is due to continued growth generated by Sterling. Total accounts under administration increased 20% to 68,510 accounts at September
30 2008, as compared to 57,004 accounts at September 30, 2007, and totsl assets under administration increased to $4.82 billion at September 30, 2008, from $4.34 billion at September 30,
2007. Management anticipates continued growth at Sterling driven in part by a recently appointed new chief executive officerwith 2S years of industry experience.
Loan Admiaistratlon. 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. fees $261,000, or 18%, to 51.2 million for the quarter ended September 30, 2008,
as compared to 51.4 million for the same quarter in 2007. This decrease IS consistent with the decline In our mortgage loan servicing portfolio. Our mortgage loan servicing portfolio
decreased to an average balance of$9SI million for the quarter ended September 2008, as compared to an avemge balance of$1.14 billion for the quarter elided September 30, 2007.
Our average service fee rate (including all ancillary income) of 0.46% for the thud quarter of 2008 was unchanged from the third quarter of 2007. The Company anticipates loan
administration fees will continue to decrease as its servicing portfolio decreases through normal amortization and prepayments.
34
2131
Table of Contents
Gain on Sale of Loans Held for Sale. Gain on sale of I,oans held for sale was for the ended September 30, 2008, as compared to $1.2 million for the quarter ended
September 30, 2007. During the third quarter of 2008, the sold $ !2:2 111111108 of SBA-ongIDated loans. The loan sales were part of our management C!f industry cQncentrations,
interest rate risk, and regular sales of the guaranteed portIon of SBA-ongmated loans. For the quarter ended September 30,2007, the company sold $14.2 million ofSBA-originated
loans, which generated gains of$I.2 miDion. Also in the third of 2007, we sold $23 milli01l; residential loans, at a gain of $7,000 to assist in the de-leveraging of the
balance sheet. The decline in gain on sale ofloans between the penods was related to market condItIons and resultant lower premiums offered by buyers. Gains on sale ofloans are part
of our ongoing business plan. We expect such gains fluctuate from quarter to quarter baw:d. on a variety of factors, such as the current interest rate environment, the
supply and mix of loans available in the market, the particular loan portfoltos we elect to sell, and market condItions.
Write-down on Other-than-temporary Impairment of Securities. Write-down on other-ihan-temporary impairment of securities represents a non-cash charge we incurred to reduce the
carrying value of two nonagency mortgage backed securities to estimated fair value. The securities written-down in the third quarter of2008 consisted of two nonagency Collateralized
mortgage obligations issued in 200S and 2006 with totsl amortized cost of $9.4 million prior to the impairment write-down. The estimated market values for the securities totaled $S.3
million at September 30, 2008, representing a decline in value of $4.1 mitlion .. All and interest have been made to date in accordance with the terms of each security.
Each security has received a ratings decline, and this information, tugether WIth the magnttude and duration of the decline in fair value, and the potential in expected future cash flows
would not fully recover the investments' principal and interest resulted in that the securities were other-ihan-temporarily impaired within the meaning of
GAAP, giving consideration to the current illiquidity in the marketplace and uncertaIDty of a recovery ID value.
Other Income. Other income was $1.1 million for the third quarter of 2008 and principally included a dividend from a cost-method invesbnent of $S40,000, income earned on bank owned
life insurance of $242,000, and other miscellaneous items that totaled $333,000 .. This compares to the third quarter of 2007 when other income was 51.S million and included income
earned on banlt-owned life insurance of$236,000; dividenda from a cost-method mvestment of$40S,000, prepayment penalties on loans and other loan fees not recognized as part of the
yield on loans of $4 I 9,000, and other miscellaneous items that totaled $429,000.
Noninterest Expense. Noninterest expense decressed $1.7 million or to $18.9 million 'for tm: ended September 30, 2008, as compared to $20.6 million for the quarter ended
September'30, 2007. The following table details the components of nonmterest expense for the penods mdlcated:
. Quarter Ended September 30,
:Z008 :Z007
3S
2132
DoDar ChilDge
Pereentage
Change
Table Df Conlenls
Compensation and employee benefits expense increased $1.2 million, to $8.3 million for the quarter ended September 30, 2008, as compared to $7.1 million for the quarter ended
September 30,2007. At September 30, 2008, the Company had 366 employees compared to 318 employees at September 30, 2007. This increase includes 35 employees at the Bank and
nine at Sterling. Employees were hired at the Bank to continue the implementation of our business .plan and included the entire staff for the Longmont branch, our mountain community
banking teams, support staff hired in connection with the opening of the Fort Collins branch, and additions to our infrastructure in loan and deposit operations and credit
administration. The additions at Sterling were hired to support our continuing growth in custodial, administrative and escrow services. Included in compensation and employee benefits
were costs of $312,000 and $273,000 for the Company's stock-based compensation plans for the quarter ended September 30, 2008 and 2007, respectively. The increase in stock-based
compensation expense is reflective oftheadditional employees hired to implement our business strategy.
Subaccounting fees, which represent fees paid to third parties to service depositOry accounts on our behalf, are incurred at the Bank in respect of custodial and institutional deposits.
Such fees declined Sl.5 million, or 26%, to $4.4 million for the quarter ended September 30, 2008, compared to $5.9 million for the quarter ended September 30, 2007. This decrease was
caused by lower short-term interest rates. Subaccounting fees are generally tied to the Federal Open Market Committee target rate for overnight deposits. The average target rate for the
third quarter of2008 was 2.00%, compared to 5.18% for the third quarter of 2007. During the period, the average balances subject to subaccounting fees increased $11.7 million, for the
quarter ended September 30,2008 to $1.12 billion from 51.11 billion for the quarter ended September 30, 2007.
Amortization of mortgage servicing rights decreased $329,000, or 40%, to $491,000 for the quarter ended September 30, 2008, as compared to $820,000 for the quarter ended September
30, 2007. Amortization of mortgage servicing rights has been declining consistently with the decline in our mortgage servicing portfolio. On. a quarterly basis, the fluctuation is also a .
function of the level of repayments of the remaining portfolio. The average balance in our mortgage servicing rights portfolio decreased to $951 million at September 30 2008 as
compared to $1.14 billion at September 30,2007. Prepaymentspeeds on our servicing portfolio were 15.4% for the quarter ended September 30, 2008 as compared to 19.3% for the quarter
ended September 30, 2007.
Occupancy and equipment expense increased $106,000, or 13%, to $898,000 for the quarter September 30, 2008, as compared to $792,000 for the quarter ended September 30, 2007.
The increase in occupancy was associated with the continued expansion of our business plan and is related to the opening of the Loveland and Fort Collins banking offices, which
opened in the fourth quarter of 2007 and the first quarter of 2008, respectively. The Company recognized $283,000 of amortization of deferred gain as a reduction of occupancy expense
for the quarter ended September 30, 2008 and 2007. This amount represents a reduction in our occupancy expense for the period from the recognition of the deferred gain resulting from
the sale-leaseback of the United Western Financial Center, which is being amortized into income over the ten-year term of the lease.
Redemption of junior subordinated debentures represents the cost to redeem trust preferred debt lind securities. On July 25, 2007, the Company redeemed 100% of the trust preferred
securities outstanding of Trust III and Ttust V. There was $15,000,000 of trust preferred securities outstanding in Trust III, the redemption price was 106.15%, and the Company had
$364,000 of unamortized issuance costs associated with this that were charged to in the quarter of2007. The balance of Trust V was $5,000,000, the redemption price
was 100%, and unamortized issuance costs were $69,000, whIch also were charged to earnmgs m the thIrd quarter of2007. There was no corresponding charge incurred during 2008.
The remainder of non interest expense, which includes postage an:d .communication eltpense, professional fees, mortgage serviaing rights subservicing fees, and other general and
administrative expenses increased approximately $197,000 to $4.9 mIllIon for the quarter ended September 3D, 2008, as compared to $4.7 million for the quarter ended September 30, 2007.
The increase is principally related to increase in professional fees related to ongoing routine legal matters and consulting fees incurred in connection with third parties that have
provided the Company with valuations services ..
36
2133
Table o/Clmtents
Income Taxes. The income tax benefit for the quarter ended 30, 2008, -;:vas $8OS,OOO as to income!B" expense of$49S,OOO for the quarter ended September 30, 2007.
Our effective tax rate was for the quarterlr penod compared to IS. 7 the In third quarter of 2008, the previously discussed other-than-temporary
impainnent of investment securities resulted m an applicable tax benefit of $1.6 mdllon. In addition, dormg the thIrd quarter of 2008, two previous uncertain tax positions were resolved
with the lapse of the statute of limitations related to the 2004 tax return years. As a result, the Company realized a reduction in its income tax expense of $694,000. In the year earlier
period, the Company resolved one uncertain tax position related to the 2003 tax return year as a result of the lapse of the statute of limitations. In the quarter ended Sepll!mber 30, 2007,
the Company realized a reduction in its income tax expense of $470,000. For the quarter ended September 30, 2008, New Markets Tax Credits favorably impacted the effective tax rate due
to utilization 0($297,000 of New Markets Tax Credits, as compared to a $279,000 favorable impact for the third quarter of2007.
COmpllrison ofResllltso/Opertltiolltl/or the Nine Months Ended September 30,2008 and September 30,2007
Net Income. For the nine months ended September 30, 2008, we $7.9 million, or $1.10 per basic and diluted share, as compared to $7.2 million, or $.99 per basic and $.98 per diluted
share for the nine months ended September 30, 2007. 10 the frrst DIne months of 2008, as compared to the first nine months of 2007. the Company increased net interest income after
for credit losses by $S.8 million, 12%. This increase was the result continuing suc:cessful of our community banking strategy. Provision for credit
losses increased to $6.2 million for the frrst nme months of 2008 compared to $1.3 nullton for the first nme months of 2007. ThIS tncrease was due to the $349 million of community bank
loans originated, $1.9 million of provision attributed to loans measured for impairments and other loan grading changes. Noninterest income declined $S.8 million due to the $4.1 million
non-cash other-than-temporary impainnent charge and lower gain 0!1 sale of loans and declining revenues from our mortgage servicing operation. Noninterest exPenses declined
$706,000 to $S5.6 million for the nine months ended September 30, 2008 due primarily to the $1.5 million charge we incurred during the nine months ended September 30,2007 to redeem
$20 million ofhigb cost trust preferred debt
Net Interest Income. The following table sets forth, for the periods and as of the dates indicated, information regarding our average balances of assets and liabilities as well as the
dollar amounts of interest income from interest-eaming assets and interest expense on interest-bearing ,liabilities and the resultant yields or costs. Ratio, yield and ra'; infonnation is
based on average daily balances where available; otherwise, average monthly balances have been used. Nonperforming loans are included in the calculation of average balances for
loans for the periods indicated.
Average
Balance
1008
Interest
2134
Nine Months Ended September 30;
Average Average
Rate Balanee
(Dollars in thousands)
1007
Interest
Average
Rate
37
2135
Table of Contents
VoIum4 /lIId Rllte Anlllysis DINet Interest Income
The following table presents the extent to which changes .in vO;lume and interest r.ates of assets. and interest-bearing liabilities affected our interest income and interest
expense during the periods indicated. is provIded ID ea.ch category respect. to: (I). changes to changes in volume (changes in volume multiplied by prior
period rate), (ii) changes attributable to changes ID rates (changes ID rates by prior volume) and (111) changes attributable to a combination of changes in rate and
volume (change in rates niultiplied by the changes in volume). Changes attributable to the comblDed Impact of volume and rate have been allocated proportionately to the changes due
to volume and the changes due to rate.
38
2136
Nine Months Ended September 30,
2008 VI. 2007
Inerease (Decrease) Due to Change In
Volume Rate Total
(Dollars in thousands)
..,",:,'
Table a/Contents
Net interest income before provision for credit losses increased $10.7 million, or 21%, to $61.1 million for the nine months ended September 30,2008, versus $505 million for the nine
months ended September 30, 2007. Net interest margin increased 62 basis points to 3.99% for the nine months ended September 30, 2008 from 3.37% for the nine months ended
September 30, 2007. The increase in net interest income before provision for credit losses was attributable to the mix of interest-earning assets and interest-bearing liabilities and an
overall decline in average interest-bearing liabilities. .
For the nine months ended September 30, 2008, community bank loans averaged $870 million compared to $503 million for the nine months ended September 30,2007. This $366 million,
or 73%, increase in average community bank loans is due to the continued successful performance of our regional banking teams' loan production efforts. The yield on community bank
loans declined by 184 basis points to 6.52% for the first nine months of 2008, versus 8.36% for the first nine months of 2007. The decline in yield is directly related to the actions of the
Federal Open Market Committee, which resulted in a decline in the prime rate of interest between the periods. Interest income from community bank loans increased by $11 million to $42
million for the first nine months of2008, compared to $31 million for the first nine months of2007.
Wholesale assets declined an average of $309 million to $\.13 billion for the first nine months of 2008, as compared to $1.44 billion for the first nine months of 2007. The yield on
wholesale assets declined 32 basis points to 4.99% for the nine months ended September 30, 2008 as compared to 5.31% for the nine months ended September 30, 2007. As a result of
these declines total wholesale interest income declined by $15 million to $42 million for nine months ended September 30, 2008, as compared to $57 million for the nine months ended
September 30: 2007. The yield on SBA loans to 3:27% for the nine 30, 2008! to 5.33% for the nine months ended September 30,
2007 due to a combination of the 275 basis pomt reductIOn m the pnme rate and premIUm amortizatIOn. PremIUm amorltzahon due to repayments of principal and repayment of SBA
purchased loans and securities was $2.5 million for first nine months 2008, co",:pared to million for the first nine months of 2007. Yields on. mortgage-backed securities were
fairly stable and declined by a modest three baSIS pomts between the to for the months of 2008, compared to 5.30% for the first DIne months of2007. The average
balance of securities declined $105 million due to repayments. Prospechvely, we anticipate contmued repayments of wholesale assets.
39
2137
Table of Con fen Is
The Company's net interest income before provision for credit losses between the nine months ended September 30, 2008 and 2007 was favorably impacted by the decline in the rates
paid on our average interest-bearing liabilities. Average increased S60 between the 10 $1.78 billion for the 2008 period, primarily as a result of
the increase in interest earning assets. The cost of the Company s dechned by 130 basis pomts to 1.86% for the DIne months ended September30, 2008 compared to 3.16% for
the nine months ended September 30, 2007. The decrease in the cost occurred because of the actions discussed above in Comparison of Results of Operations for the quarter ended
September 30, 2008 and 2007.
Provision for Credit Losses. The provision for credit losses was $6.2 million for the nine months ended September 30, 2008, compared to $1.3 million for the nine. months ended
September 30, 2007. The provision for credit losses for the first nine months of 2008 is principally related to: (i) the growth of approximately $349 million of community bank loans since
December 31 2007, (ii) five loans tbat are impaired and required a total provision for credit losses of $1.9 million, and (iii) approximately S8S0,OOO related to other loans tbat demonstrated
signs of weakness for which the loan grade was reduced. The. provision for credit losses for the first nine months of 2007, was the result of the growth of nearly $206 million of
community bank loans offset by pay downs of mortgage loans and in evaluation of loan for ce.rtain commercial loans in the period. For a
discussion of the Company's allowance for credit losses methodology see "SIgnIficant Accounting Estimates - Allowance for Credit Losses," lind, as it relates to nonperforrning assets,
see "Asset Quality."
Nonlnterest Income. An analysis of the components of non interest i1icome is presented in the table below.:
Nine Months Ended September 30,
2008 2007 Dollar Change Percent Change
(Dollars in thousands)
Custodial, Administrative and Escrow Services. Service fees increased S1.S million, or 24%, to $7.7 miilion for the nine months ended September 30, 2008, as compared to $6.2 million for
the nine months ended September 30, 2007. The increase is due to continued growth generated by Sterling and the trend in revenue is consistent with the discussion above under
"Comparison of Results of Operations for the Quarters Ended September 30, 2008 and 2007 - Custodial, Administrative and Escrow Services."
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 administrll:tion fees SI.1 million, or 22%, to $3.8 million for the nine months ended September 30,
2008, as compared to $4.9 million for the nine months ended September 30, 2007. This decrease IS consistent with the decline in our mortgage loan servicing portfolio. This portfolio
decreased to an average balance of 5993 million for the nine months ended September 30, 2008, as compared to an average balance of 51.21 billion for the nine months ended September
30 2007. Our average service fee rate (including all ancillary income) of 0.48% for the first nine months of2008 was two basis points lower than the O.SO"I0 rate for the first nine months of
2007. The Compmy anticipates loan administration fees will continue to decrease as its servicing portfolio decreases through normal amortization and prepayments.
Gain on Sale of Loans Held for Sale. Gain on sale of loans was 5742,000 nine ended September 30, as to 52.1 million for the nine months ended September
30, 2007. During the first nine months of 2008, the Company sold 521.1. million ongmated from our SBA dIVISIOn, which accounted for all of the gain on sale for the period. The
loans included loans we elected to sell to manage industry concentrations. Dunng the first mne months of 2007, the Company sold 529.5 million of originated loans from our SBA
division, which resulted in substantially all the gain on sale realized .... the period. We also sold 523 mi!lion of wholesale residential loans and realized a gain of$7,OOO. Gains on sale of
loans can fluctuate significantly from period to period based on a vanety of factors, such as the current mterest rate environment, the supply and mix of loans available in the market, the
particular loan portfolios we elect to sell and market conditions.
40
2138
Table of Conlenl.
Gain on Sale of Available for Sale Investment on ?favailable securities $98,000 during the first nine months of200J. We sold million of mortgage
backed securities from our available for sale secunties portfoho, pnnclpally to assist In the de-leveraging of the balance sheet. There were no sales of securities during the first nine
months of 2008.
Write-down on Other-tJum-temporary I!npaIrment ofSeeuritles Plesae refer to the discussion relating to the write-down on other-than-lempomJy impairment of securities at
"Comparison of Results of Operations for the Quarters Ended September 30. 2008 and September 30. 2007."
Other Income. Other income for the nine months ended September 30, 2008 was $2.4 million, or $744,000 less than for the nine months ended September 30,2007. The decline was the
result oflower prepayment penalties and other loan fees not recognized as part of yield on loans, which declined $697,000 between the periods. Other income for the·first nine months of
2008 principally includes income earned on bank-owned life insurance of $71.9,000,. p.repaymentpenalties on I?ans and other loan fees not recognized as part of yield on loans of .
$262,000,. rental income of $311,000 on a by. a non-core subSidiary, cost-method of$54O,OOO and other miscellaneous items. This compares
to the first nine months of 2007 when other Income Included Income earned on bank-owned Insurance of$698,OOO, diVidends from cost-method investments 0($405,000, prepayment
penalties and other loan fees not recognized as part of yield on loans of $959,000, and rental Income of $311,000 on a property owned by a non-core subsidiaJy and other miscellaneouS
items.
Noninterest Expense. Noninterest expense decreased $706,000, or 1%, to $55.6 million for the nine months ended September 30,2008, as compared to $S6.3 million for the nine months
ended September 30, 2007. The following table details the major components of noninterest expense for the periods indicated:
Nine Months Ended September 30,
Percentage
2008 1007 DoUar Change Change

"i ':", 'j,:
Occupancy and equipment 2,425 2,170 2SS ....... .... ... . ..... 12%

cOmpensation and employee benefits expense incresaed $3.6 million, or 18%, to .$23.6 for the months ended September 50, 2008, as compared to $20 million for the nine
months ended September 30, 2007. This increase is due to costs for employees, IDcludlng regIOnal banking teams and additions to the credit admiaistration team added at the Bank to
continue the implementstion of our community banking strategy. Included Incompensati.on and eml!loyee b,,?efits were costs of $861,000 and $727,000 for the Company's stock-based
compensstion plans for the nine months ended September 30, 2008 and 2007, respectively. The Increase In stock-based compensation expense is consistent with the hiring of new
employees to execute our business strategy.
41
2139
Table of Content.
Subaccounting fees, which represent fees paid to third parties to service depository accounts on our behalf, are incurred at the Bank in respect of custodial and institutional deposits.
Such fees declined $3.6 million, or 20%, to $14.1 million for'the nine months ended September 30, 2008, compared to $17.7 million for the nine months ended September 30, 2007. This
decrease was due to the decrease in the interest rate upon which su,ch feeure based. The average balance of deposits subject to subaccounting fees was relatively unchanged at $1.13
billion. Generally, subaccounting fees are tied to the Federal Open Market Committee target rate for overnight deposits. The average target rate for the nine months of 2008 was 2.43%,
compared to 5.23% for the nine months of 2007.
Amortization of mortgage servicing rights decreased $931,000, or 33%, to $1.9 million for the nine months ended September 30, 2008, as compared to $2.8 million for the nine months
ended September 3D, 2007. Amortization of servicing rights based on .the mortgage portfolio and .prepayment rates experienced with respect
to the underlying mortgage loans within the portfolto. The average balance ID our mortgage servIcIng nghts portfolto decreased to $993 mtllton at September 30, 2008, as compared to
$1.21 biliion at September 30, 2007. Annualized prepayment speeds on our servicing portfolio were 17.0% for the nine months ended September 30, 2008, as compared to 20.3% for the
nine months ended September 30, 2007.
Occupancy and equipment expense increased $255,000, ?r 12%, to $2.4 million f?r nine months 30, 2008, as compared to $2.2 for the nine months ended
September 30, 2007. Occupancy and equipment expense IS shown net of the amortlzalton oflhe deferred from the sale-leaseback of our headquarters building in September
2006, which is being amortized into income. over the 10-year term of the !he of galD realtzed was and ,$847,000 for the nine months ended September 30,
2008 and 2007 respectively. The increase ID occupancy between the penods IS assocIated WIth the Loveland branch whIch opened In December 2007, the Fort Collins branch which
opened in 2008 and software expense associated with the Apri12007 implementation of our new core processor.
Redemption of junior subordinated represents the cost redeem It'ust debt and The Company three of its outstanding trust preferred debt
issuances Trust I III and V during the first DIne months of 2007 whIch totaled $25 mtllton. The Company Incurred a charge of$1.5 mtllton that represented unamortized issuance costs
and a red;mption 'premium. There were no redemptions of trust preferred debt during 2008. .
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 $1.4 million, or 12%, to $13.6 million for the for the nine months ended September 30, 2008, air compared to $12.2 million for the nine months ended
September 30, 2007. The largest cause of the increase was fair value of our wholesale portfolio. For the nine months ended September 30, 2008, we
incurred a lower of cost or fair value charge on our resldenltal portfoito oUI.2 mtllton compared to lower of cost or faIr value charge of $687,000 in the first nine months of 2007. The
continuing decline in value of the portfolio was due to conditions the financial services industry in general and not due to a significant change in
delinquency; payment history, or other factors that would be dIrectly attnbutable to our portfolto.
Income Tues. The provision for income taxes for the nine ended September 3D, was $2.0 tn.illion, or 19.8% of compared to $2.1 million, or 22.4% of pre-tax
income for the nine months ended September 30, 2007. The pnmary cause of the decltne tn the effective tax rate was the preVIously dIScussed other-than-temporary impairment of
investnient securities, which resulted in an applicable tax benefit.of$1.6 million. Income before income taxes was $9.9 million for the nine months ended September 30, 2008, compared to
$9.2 million for the nine months ended September 30, 2007. Our tax rate differs from enacted tax rates for the year to date periods of 2008 and 2007 principally due to the resolution of
uncertain tax positions, utilization of New Markets Tax Credits and bank-owned life insurance. During the third quarter of 2008, two previous uncertain tax positions were resolved with
the lapse of the statute of limitations related to the 2004 tax return years. All a result, the Company realized a reduction in its income tax expense of $694,000. In the year earlier period,
the Company resolved one uncertain tax position related to the 2003 tax return year as a result of the lapse of the statute of limitations, and the Company realized a reduction in its
income tax expense of$470,OOO. New Markets Tax Credits were $889,000 and $838,000 for the nine months ended September 30, 2008 and 2007, respectively. New Markets Tax Credits
. continue through 2012. .
42
2140
Table of Conlenl.
Balance Sheet 1
Total assets increased $145 million. or 7%. to $2.24 billion at September 30. 2008 from $2.10 billion at December 31. 2007. Community bank loans increased by $349 million to $1.06 billion
at September 30.2008. compared to $706 million at December 31.2007. The Company's loan growtbwas higher tban planned for tbe first ninemontbs of 2008. yet the Company
maintained stable asset quality overall and in particular in the community bank portfolio. The growth of community bank loans was partially offset by reductions in wholesale assets.
Wholesale loans declined $115 million. to $444 million at September 30. 2008. compared to $559.0 million at December 31.2007. This decline csme from repaymenta and approximately $18
. million of residential loans tbat were securitized with FNMA in tbe fmt half of 2008. Investment declined by $86 million in 2008. to $576 million at September 30. 2008. compared
to $662 million at December 31. 2007. This decline was the result of repayments. temporary impairments on certain available for sale securities. and other-than-temporary impairments on
two held to maturity securities. as discussed below. and partially offset by approximately $18 million of securities we created from residential loans and modest purchases of CRA
eligible securities.
Totailiabilities increased by $158 million to $2.14 billion at September 30. 2008 from $1.98 billion at December 31. 2007. The change in liabilities. which is consistent witb tbe increase in
assets. was principally tbe result ofincreases in deposits. including custodial escrow balances of$198 million partially offset by a $40 million reduction. in FHLBank borrowings.
\, .
/tlJlestment SecurltJes
See Note 3 to the financial statements in this report for detailed information related to the Company!s investment securities portfolio.
At September 30. 2008. the Company's mortgage-backed investment security portfolio had an amortized cost of $556 million and consisted of four classes of securities: agency
securities. prime collateralized mortgage obligations (CMO). Alt-A CMOs. and CMOs collateralized by payment option adjustable rate mortgages. The Company's available for sale
mortgage-backed investment security portfolio was of instruments with an estimated fair value of $63 million. and the held to maturity portfolio was comprised of securities
with an amortized cost of $458 million. botb as shown In the table below: .
Based on lowest rating assigned by credit rating agency at September 30. 2008
Available for 881e
Total AgencY/AAA AA A BBB <BBB
Based on lowest rating assigned by credit rating agencY at September 30. 2008
Held to matnrlty
Total AgencY/AAA AA A BBB <BBB
{Dollars in thousands}

... ..:.·..g.·.·,.,:_:,.,a ..•,_ .. g .• •.p.··.·.,·.as: .....; .. , .... .., .• s •..,· .•, •.th .. ,.,.,."·,·,·., ..•. ,r",'.,.·,.,o.,.: ..;·;.. ..:,.,... g" ....... '.,h."' ••'.',.".• ' .. ,:.::, •., .. , ..' •. ,., ...: ... ,,,' .. ,' ....•..•••.. , ••.. :, •. , .." .•.••• •.... , .. ' .•. ,.:'.•.... ' ..',., ..••.. , .•.'.','.'.,'._ ...•.. ".'.::, ... , .• ',.',.,'.,:":, ..' .....• ',..•, .. ' ..... ; •.•.•••.• , •.. '.'.'.',:.',.' ...•. :., ...• '." ••. " .. " ... ' ... ,'.' .•.••. ', ..• , ..•......... , ...:,." ..•, ....•. .. "., .•.. ' ....•..... ' •.'., .. ,.,',.,.,', •..• , ....• '.: .•.• '" ..... : ••.:'.:,; .•',' ..•. ,,' .... ,.', .. '.,.,',.•. , .. : .. ...• ,· .• '.64" •. •. · .•. ..•'.,:'.".'.·., .•.•.:::,:.,',.:.•. ' .•. , .., ..' ..., .•. ' ..'., •.•... , ..•, .•. '"..•. ;.' .•' .• ' .• ,...$,. 4:032
',:.:":' ...... "> ..', , .... ' .. ' .... ..
:if>' ':k·':·
43
2141
Table or Cont.nts
The available for sale portfolio is comprised ofthe securities shown above and includes fin securities with an estimated fair value ofS16.7 million, and an amortized cost of$47 million
that represent all of the CMOs collateralized by payment adjustable mortgages. Of these securities, have received a downgrade from one or more of the rating agencies
to below investment grade based on the lowest ratmg assigned to the secunty at September 30, 2008. The secuntJes that have been downgraded, are the same securities that comprise
the overwhelming majority of the decline in fair value of the available for sale securities. At September 30,2008, the fair value of the available for sale securities was $21.4 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 represents a temporary impairment due to current economic conditions.
The held to maturity portfolio is comprised of the securities shown above and 88% of this portfolio continues to be rated AA higher. The two securities that comprise the $5.3 million
of amortized cost with a lowest rating assigned of below investment grade at September 30, 2008 were the securities that were detennined to be other-than-temporarily impaired at
September 30, 2008. Based on internal analyses and analyses performed by independent third parties, we believe the decline in fair value on the remaining securities is a temporary
impairment due to market conditions.
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 insignificant impairments in these securities does not reverse, tbe Company will incur other-than-temporary impairments which inay result in material charges to
earnings in future periods. .
Loan Port/olio
Our major interest-earning asset is our loan portfoli? A significant part of our asse.t liability involves monitoring the composition of our loan portfolio. The following
table sets forth the composition of our loan portfoho by loan type as of tbe dates mdlcaled. The amounts m the table below"are shown net of premiums, discounts and other deferred
costs and fees.
September 30,
1008
December 31,
1007
(Dollars In thousands)
September 30,
1007
At September 30, 2008, total community bank loans to $1.055 billion to $706 million at December 31,2007 and $608 million at September 30, 2007. Commercial real
estate loans increased to $461 million, whicb represents an IOcrease of$174 million SlOce year-end 2007. Commercial loans increased $42 million in 2008 to $131 million and are now 12%
of our community bank portfolio. The commercial loan. growth .is diversifie.d in and includes cash flow loans, equipment, borrowing base and other
commercial credits. Tbe Company continued to expand Its national fOOlpnnt througb Its SBA diVISion With botb SBA 504 and 7a lending activities. Our entry into tbe mountain
communities of Aspen and tbe Roaring Fork Valley also contributed to the growth. In addition, management is making a continuing effort to diversify the portfolio into less riskier
components, including owner-occupied commercial real estate. " "
44
2142
Table of Content.
The following table presents the dt:tails of the construction and development ("C&D") portfolio for the periods indicated:
September 38,
1888
Deeember 31,
lO87
In the nine months of 200S, the c&D portfolio grew $92 million to $365 million and represented 24.3% of our entire loan portfolio and 34.6% of our community bank portfolio. At'year end
2007 the C&D portfolio comprised 3S.6% of the community bank portfolio. Within construction portfolio the loan breakdown is approximately 40"10 single family, 3S% commercial,
and 22% multifamily. The majority of the land development loans are for land that IS under development and is generally intended to either be sold to contractors or end users as lot
loans for commencement of construction. '
The Bank haS no exposure to production builders and no w:u-ehouse lines to s!nsle-family mortgage lenders: The Bank's construction portfolio is located throughout Colorado,
including several resort markets, (e.g., Aspen, Steamboat Spnngs, and.Breckenndge.) Our land and construction lending is to well-qualified borrowers, the vast majority of which
include personal guarantees, and have loan to value averages of approximately 75%. At September 30, 200S, the construction speculative to pre-sold ratio was approximately 59% to
41%.
As of September 30, 200S, we have defined regions for our Ca.:D portfolio: in Colorado, and one region for loans outside Colorado. Within Colorado. four of the
defined geographic regions account for $269 million. or 74 Yo. of the C&D portfolio. as shown m the ,table below. '
September 38,1008 Deeember 31, 1007
Outstanding Pereent Outstaudlng Pereeut
The c&D loans located outside of Colorado include $4.2 million originated from our SBA division located in Texas. The remaining C&D loans located outside Colorado include two
loans that totaled $14.0 million located in Arizona, and one loan for $2.9 million located in California. There were no C&D loans located in Florida or Nevada. '
SBA originated loans consist of the following and are included in the community bank loan totals above:
4S
2143
Table or Conlents .
September 30, December 31,
1008 1007


Total $ 127,040 $ 99,381
The Bank's SBA division is a participant in the national preferred lenders program ("PLP") of the United States Small Business Administration. At September 30, 2008, SBA originated
loans consist of $44.8 million of SBA 504 loans, $4.3 miIIion of guaranteed portions of SBA 7a loans, $19.5 miIIion of unguaranteed portions of SBA 7a loans, $17.0 million of
construction loans and $41.4 million of conventional commercial real estate loans. These loans are included in the totals discussed above. Generally" SBA department construction loans
wiII become a SBA 504 loan upon completion of construction.
ABsetQuality
As part,of our asset quality function, we monitor nOJiperfo.,rung assets on a regular basis. Loans are placed on nonaccrual when full payment of principal or interest is in doubt or when
they are 90 days past due 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
contractual requirements of loan agreements. These loans are placed under close supervision with consideration given to placing the loan on nonaccrual status, increasiog the
allowance for credit losses and (if appropriate) partial or full charge..aff. Nonaccrualloans are further classified as impaired when the underlying collateral and other originally identified
sources of repayment are considered insufficient to cover principal and interest and management concludes it is probable that we will not fully collect all principal and interest
to contractoal tenns. After a loan is placed on statu:" ioterest previou.sly but not yet collected is reversed against current income. If interest paymenta are
received on nonaccrualloans, these payments are apphed to pnnclpal not taken mto mcome. We .do not place .Ioans back on. accrual status unless back interest and principal
payments are made. For certain govemment-sponsored loans, such as FHA-msured and VA-guaranteed loans, we continue to accrue mterest 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 govemment-sponsored accruing loans that were
past due 90 or more days was $8.3 million, $5.4 million and $6.6 million at September 30,2008, December 31,2007, and September 3D, 2007, respectively. Substantially all of these loans
were originated by our subsidiary Matrix Financial prior to February 2003. GNMA programs allow financial institutions to buy back individual delinquent mortgage loans that meet
certain criteria from the securitized loan pool for which the At the servicer's option and without prior authorization, the servicer may repurchase
such a delinquent loan for an amount equal to 100 percent of the relll8lnmg pnnclpal balance of the loan. These guaranteed accrumg loans are not included in the table of nonperforming
loans nor in the discussion of delinquent loans below.
The following table sets forth our nonperfonning asseta as of the dates iodicated:
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2144
September 30,
1008
December 31,
1007
Septem.,er 30,
1007
Table or Contents
At September 30, 2008, total nonperforming loans were $15.1 million, compared to $10.5 million at December 31, 2007 and $11.6 million at September 30, 2007. Managementanalyzes and
reviews nonperforming loans by loan type. Residential nonperforming loans represent legacy wholesale assets. The balance of nonperforming residential loans increased $338,000 at
September 30, 2008, compared to December 31,2007, and declined $782,000 versus September 30,2007. Overall, nonperforming residential loans totaled $8.2 million, $7.9 million, and $9
miIlion, at September 30, 2008, December 31, 2007, and September 30, 2007, respectively. This represents 2.34%, .I. 78%, and 1.92% of the residential portfolio for those respective periods.
The increase in nonperforming residential loans as a percentage of the residential portfolio is due to continued repayments of the remaining performing portion of the portfolio.
Residential loans 60 days past due at September 30, 2008 were $2.6 million, compsred to $3.5 million at December 31, 2007. The Company's level of non performing residentialloans is
generally consistent with the national based on' information by the T.he. Company's residential portfolio is.
geographically dispersed. The Company owns loans tn 48 states, and concentraltons of gre.ater than 5% eXist In California (37%), IllinOiS (7%), Georgia (7%), Florida (5%) and Texas
(5%). Of the $131 million of loans located in 48% to the Company recourse back to the. If any such were to. become nonperforming, the Company
has the.ability to require the seller to perform on Its recourse obligatIOn. The average loan size of the wholesale resldenllalloan portfolio IS apprOlumately $138,000 and consists ofloans
that on average are approximately 7.1 years seasoned, were rigorously underwritten 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. '
Nonperforming bank loans totaled $6.2 million, $1.7 million, and $2.6 million at September 30, 2008, December 31, 2007, and September 30,2007, respectively. Nonperf\lrming
community bank loans increased in 2008 due primarily to two construction loans that have been placed on nonaccrual. In total, nonperforming community bank loans represent 58 basis
points of the community bank portfolio at September 30, 2008,compared to 24 basis points and 42 basis points at December 31, 2.007 and September 30, 2007, respectively.
AlloWllnce for Credit Losses
Management believes the allowance for credit losses ill. critical to the understanding of our financial condition and results of operations. Selection and application of this "critic8I
accounting policy" involves judgments, estimates, and uncertainties that are·susceptibleto change. In the event that different assumptions or conditions were to occur, and depending
upon the severity of sucll differences, a materially different financial condition or results of operations is a reasonable possibility.
We maintain our allowance for credit losses at a level that management believes is adequate to absorb probable losses inherent in the existing loan portfolio based on an evaluation of
the collectibility oflnans, 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 may result in specific reserves. 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.
47
2145
Table of Contents
The foJlowing table sets forth information regarding changes in our aJlowance for credit losses for the periods indicated. The table includes the allowance for both wholesale and
community bank loans:
Nine Months Ended
- September 30,
Net residential loan charge-offs were $291,000 and $166,000, for the quarters ended September 30, 2008 and 2007, respectively. On an annualized basis, this represents losses of 31 basis
points and -13 basis points for those same periods, respectively.
The table below provides a breakout of the allowance for credit losses by loan type:
The following table presents a summary of significant asset quality ratios for the period indicated:
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2146
September 30,
2008
December 31,
September 30,
2007
September 30,
Table of Contents
The percentage of the allowance for losses to loans varies due to !he of our of I?ans. We amilyze allowance for credit losses related to the
nonperforming loans by loan type. hlstoncal loss experience and loans measured for Impairment. In conJuncllon With other factors, thiS loss exposure contribu.tes to the overall
assessment of the adequacy of the allowance for credit losses.
The allowance for credit losses allocated to community bank loans to nonperforming community bank loans was 226%, 498%, and 286%, at September 30, 2008, December 31, 2007, and
September 30, 2007. respectively. The allowance for losses allocated to residential t? residential loans was 23%, 24%, and 24%, at September 30, 2008,
December 31,2007, and September 30, 2007, respectIVely. The allowance to nonperformmg resldenllalloans IS reflectiveof the Company's loss history on residential loans, which
indicates to us the allowance level is adequate.
The total allowance increased to 1.06% at September 30, 2008, compared to .82% at December 31, 2007 and, 79% at September 30, 2007. The overall increase in the allowance is related to
the overall increase in the community bank portfolio, certsin loan grading changes and allowance related to impairments. The total allowance for residential loans is .55% at September
30, 2008, compared to .42% at December 31, 2007 and .46% at September 30, 2007.
The increase in the allowance for credit losses is related primarily the balance transformation and is reflective of the. higher allowance attributable to community bank loans in
general as compared to residential loans. The for commuDlty bank IS !.32% at September 30, 2.008, .1.21%. at 31,2007, and 1.20% at September 30, 2007. The
level of the allowance at September 3D, 2008 relallve to December 31, 2007 IS of two loans that are Impaired With an .assoclated allowance of$ 1.6 million. The increase in the
percentage of the community bank allowance at September 3D, compared to September 3D, 2007 was generally due to the impairments, and a few larger loans. that were reduped in
loan grade by our credit administration team to reflect current conditIOns of those loans. .
Liquidity
The Bank is focused on generating deposits .fr?m its expansion.of banking through the opening locations along the Colorado Front Raiige and
selected mountain communities. These depOSits are anllclpated to fund a Significant portion of our liqUidity needs for our commuDlty banking strategy.
49
..
2147
Table of Conlenl.
The following table sets forth the balances for. each major category ofthe Company's deposit accounts and the weighted-average interest rates paid for interest-bearing deposits for the
periods indicated:
September 30, Z008
Average
Amount Rate
December 31, Z007
Average
Amount Rate
September 30, Z007
Average
Amount Rate
(Dollars In thousands)

Totsl deposits increased $181.7 million between September 30, 2008 and ,December 31,2007. Appr?ximately $92.9 million of this growth is from our community banking offices. This
growth includes $45.3 million of certificate accounts generated from a third quarter of 2008 marketing campaign, an increase of $4.0 million from growth of money market and NOW
accounts, and $13.7 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 member of the CDARS network. Each member bank issues certificate accounts in denominations
below $100,000, resulting in full FDIC insurance for the entire deposit. For reporting CDARS are considered brokered deposits. However, for financial reporting
purposes, as these deposits were generated by local customers through our banktng offices we conSider these part of our community banking deposits.
The following table sets forth tbe balances for categories of deposits and custodial escrow balances oftbe Company by source for the periods indicated:
September 30,
1008
December 31, September 30,
Z007 1007
(Dollars ill thousands)
',. :. .j' J., :'.'{' ,,' .' _c:' "
",.:'
., .. t' "':';","': i,':,:\·:,';:':; O";i. ;"' ': ",: 1;"',., c'''' .. . ,,',> !
Other wholesale deposits 75,430 15,881 21,000
,2": ')":"";'":"!: ;.' '{;;',; L ,;/i ';. ":r" ," ;';$..
Community bank deposits represent deposits attracted by our regional banking teams as discussed above. We issued $35 million of brokered deposits in tbe third quarter of 2008 in
order to increase our overall liquidity position. The deposits have malurities of nine months to one year. Sterling and Matrix Financial are our wholly owned subsidiaries. The decline in
balance at Sterling is related to an account. for one life settlement agent for special and a balance of$S3.3 million and $103.8 million at September
30,2008 and December 31,2007, respectively. Management elected to thiS relatto.nsblp .and termmate certam elements of business with respect to this large life settlement
agent account. The restructured relationship will now allow the Company to pursue bustness tn the same industry on a non-exclusive basis. During the nine months of 2008
approximately $51 million of these deposits were Througb marketing efforts, growth in new. accounts and the increase iii uninvested cash in
accounts offset $18. million of the witbdrawn depOSits. The tncrease at Matnx Ftnanclal at September 30, 2008, compared With year end 2007 is a seasonal fluctuation because many
jurisdictions require tax payments in the fourth quarter of the year, which reduces escrow balances near year end. Prospectively, we expect this balance to decline consistent with the
declining mortgage servicing business and our decision to reduce that activity. Matrix Financial Solutions, Inc. ("MFSI") are deposits that represent custo,mer assets under
administration by MFSI. The Company owns an approximate 7% interest in MFSI. The balance ofthese deposits has declined approximately $10 million since December 31,2007 due to
timing of casb flows. Legent Clearing, LLC are deposits. tbat represent institotional deposits received through Legent Clearing, LLC. Tbe Bank acquired these deposits initially in the
third quarter of 2006. Deposii concentrations are deposits that represent deposit funds from three, three and five institutional relationships maintained by the Bank as of September 30
2008, December 31, 2007, and September 30, 2007, respectively. Included in deposit is one institutional relationship witb balances of$507.2 million, $455.9 million and
$458.8 million at September 30, 2008, December 31, 2007, and September 30, 2007, respectively. See further discussion of deposit concentrations in our Form 10-K for December 31 2007
Item lAo "Risk Factors - Risk Related to Our Business" and Note 7 - "Deposits" to our consolidated financial statements included in this report. ' ,
so
2148
Table of' Contents
Bank Liquidity. Liquidity management is monitored by an Asset Liability Management Committee ("ALCO"), consisting of members of management and the board of directors of the
Bank, which reviews historical funding requiremerits, 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 retail, commercial institutional deposits, from th: and other borrowings and funds generated from operations. Funds from
operations include principal and interest received on and While and amortization of loans and securities provide an indication of the
timing of the receipt of funds, changes inmterest rates, economic conditions and competltlOn strongly mfluence mortgage prepayment rates and deposit flows, reducing the
predictability of the timing on sources of funds.
The Bank has an internal policy that requires certain liquidity ratios to be met. That current policy requires that we maintain a set amount of liquidity on the Bank's 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 September 30, 2008, the Bank had unused borrowing capacity at FHLBank of approximately
$215 million.
At September 30, 2008, the Bank had letters Of. credit, loan origination. c.onu,nitrnents and and retail lines of credit of approximately $399 million.
Management anticipates that we will have suffiCient funds avadable to meet current ongmatlon and other lendmg comrrutments.
Company Liquidity. Our main sources of liquidity at the hold.ing company level are cash: n.otes receivable, dividends and tax payments from our subsidiaries, as well as a revolving line
of credit maintained with a large regional correspondent bank m the total amount of$30 million. As of September 30, 2008, we had $20 million undrawn and available under this facility.
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
long-term inability ofa subsidiary to make payments could significa?tly ill!pact. the Company's Historically, the Bank has made the majority ofthe dividend payments
received by the Company. As a result of the liqUIdity generated through and other at Company, the did not pay a dividend to the Company in
the years 2004 through 2006. The Bank commenced the payment of quarte:ly to the Company With the Bank's earnmgs of the first quarter of 2007. Prospectively,
based on capital ratios and other factors, management expects the Bank Will pay dlVldends at the rate of approXimately 33% to 40% of the Bank's net income. If dividends and tax
payments from subsidiaries are not sufficient to fund the of the Company, will utilize the credit facilities discussed above, as needed, to meet its own
and the other subsidiaries' financial obligations. The credit faclhtles allow the Company to Issue additional trust preferred securities, which, accordingly, are contingent sources of
liquidity for the Company.
The Company commenced a quarterly cash dividend program in 2007 and paid quarterly cash in the amount of $.06 per share. On November 3, 2008, a cash dividend was
declared for shareholders of record on December 5, 2008, payable on December 15, 2008. The ability of the Company to declare and pay a dividend prospectively will depend on a
number of factors, including future earnings, dividends received from the Bank, capital requirements, financial condition and future prospects and such other factors that our Board of
Directors may deem relevant. See further discussion of liquidity risk in our Form 10-K for December 31,2007, Item lA. "Risk Factors - Risk Related to Our Business" and Part II, "Other
Information" Item lA, "Risk Factors"included in this report.
51
2149
Table of Contents
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The disclosures set forth in this item are qualified by the section captioned "Forward-Looking Statements" included in Item 2. Management:V Discussion and A,nalysis of Financial
Condition and Results of Operations of this report and other cautionary statements setforth elsewhere in this reporl. .
See the discussion ofmarlcet risks included in Item 7A. QUantitative and Qualitative Disclosures About Market Risks in the 2007 Form lOoK. There has been no significant change in the
types of market risks faced by the Company since December 31, 2007. .., .,
At September 30,2008, management believes Company's rate risk is neutral with a modest asset sensitivity. Th!s means the results of the Company's net interest
income and net income would be expected to Improve modestly If IDterest rates IDcreased from current levels. Management also beheves that continued interest rate declines from the
Federal Open Market Committee would a negative impact on the resulta of operations. The continued execution of our business plan is expected 10 mitigate the impact of the
current interest rate environment if rates remalD stable or decline further.
Item 4. Controls and Procedures
BVlllutl1ion of Disclosure Controls lind Procedures
An evalustion of our disclosure procedures .(as in Rule 13a-.15( e the Exchange .Act of 1934 (the "Act"» was carried out as of September 30, 2008
under the supervision and with the partIcIpation of our ChIef Executive Officer, Chief FmanclalOfficer, ChIef Accounting Officer and several other members of our senior management
Our Chief Executive Officer, Chief Financial Officer and. Chief Accounting Officer concluded that, as of September 30, 2008, the Company's disclosure controls and procedures were
effective in ensuring that the information we are required to disclose in the reports we file or submit under the Act is (i) accumulated and communicated to our management (including
the Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer) to allow timely decisions regarding required disclosure, and (ii) recorded, procesSed, summarized and
reported within the time periods specified in the SEC's rules and forms. .
Chllnges in Internal Controls
There were no changes in our internal controls ov; financial reporting for the quarter ended September 30, 2008, that have materially affected, or are reasonably likely to materially
affect, such controls.
We do not expect that our disclosure controls and procedures and internal control over reporting will prevent all error and all fraud. A control procedure, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because· of the .inherent limitations in all control
procedures, no evaluation of controls. can assw;ance that all control issues and of fraud, if any, within the Compai1y have been detected. These inherent
limitations include the realities that Judgments m declslon-makmg can be faulty, and that breakdowns ID controls or procedures can occur because of a simple error or mistake.
Additionally, controls can be circumvented by the .individual of some by collusion of two or more people, or by management override of the control. The design of any
control procedure also is based in assu.mptions about the offutore events, and there cD? be that any design will succeed in achieving its
stated gools under all potential futore condItions; over time, controls may become madequate because of changes m condItions, or the degree of compliance with the policies or
procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud occur and not be detected. .
Part n . Other Information
Item 1. Legal Proceedings
Legal proceedings of the Comllany are more fully described in 21 to the audit.ed in the Company's lOoK year ended December 31, 2007. During the
nine months ended September 30, 2008, there were no matenal changes to the mf()rmatJon preVIously reported, except as dlsclosedm Note 16 Commitments and Contingencies-
Contingencies _ Legal to the consolidated financial statements included in Part I of this Form IO-Q and which are incorporated herein by reference.
52
2150
Table or Contents
Item IA. Risk Faeiors
During the nine months of 2008, there were no mate,rial changes to the quantitative and qualitative diselosures of our Risk Factors previously reported in the Annual Report contained in
the Company's Form IO·K for the year ended December 31, 2007, except as follows:
A44ltiolla' IIIII1'kllt COIlCllm oVllr ;lIl'IISImellt Ifllt:llritin backed 6y mortgage ,-could create ioun In the COmpll"y':r lnI'e:rtmelll JHlrifolio. A majority of the Company's
invesln'ient portfolio is comprised of securities where mortgages are the underlying collateral. These securities include agency-guaranteed mortgage-backed securities and nonagency
mortgage-backed securities and collateralized mortgage obligations. With the recent national downturn in real estate markets and the rising mortgage delinquency and foreclosure rates,
investors are increasingly concerned about these types of securities, whichbave negatively impacted the prices ofsuch sec:urities in the marketplaCe. Continued negative trends in the
underlying'mortgages could lead to material other-than-temporary impairment charges in the future. The of our mortgage-backed securities depends on the performance of
the underlying loans in the related loan pools. If credit on those loans were to exceed tranches designed to credit-enhance our securities, we would not receive
the full stated interest due on the securities or our full pnnclpal balance, or both. The determmation of other-than-temporary impairment is a significant estimate and is susceptible to
change prospectively. If we were to conclude there were unrealized which were other than temporB?' -which we evaluate by considering estimates ofret:nverahility, as welI as
the duration and severity of the unrealized loss - we would be under GAAP to reduce cllf1!1ng amount of the security to fair value and record a corresponding charge to
earnings, which would also reduce our regulatory and In,tPact the Company's CapItal These negative impacts could significantly impair the Company's ability to
borrow funds under credit arrangements, as well as vanous matenal deposItory arrangements and relationshIps.
See Item IA. "Risk Factors" in the Company's Form 10-K for the year ended December 31, 2007 for Ii detailed discussion of additional Company "Risk Factors."
Item lB. Unresolved StatTComments
On September 11, 2008, the Company received a comment leiter the Securities and Exchange Commission concerning our December 31, 2007 Form 10-K, March 31, 2008 Form 10-Q,
and the June 30, 2008 Form 10-Q, The Company responded to thIS comment leiter on September 25, 2008. The comment letter requested clarification of certain disclosures made in those
documents and revisions to future filings. Such been inc0!l'0rated herein in Company's Form 10-q for September 30,2008. As of the date of this Form 10-Q, the
Company has not received a response from the CommIssIon WIth regard to Its response; accordlDgly, the comments remalD unresolved. , .
Item 1. Unregistered Sales of Eqnlty Securities and Use of Proeeeds
On November 9, 2006, the Company's Board of Directors authorized the repurchase of up to 5% of the outstanding shares of the Company's common stock. On August 2, 2007 the
Company's Board of Directors authorized an additional repurchase of 5% of the outstanding shares of the Company's common stock. As of September 30, 2008, the Company ru:s no
further plans to repurchase additional shares ofits common stock. '
Item 4. Submission of Matters to ai Vote cifSecurity. Holders
None.
Item s. Other Information
None.
53
2151
Table of Contents
Item 6. Exhibits
' .
3r1" .. .... .. '" .....

54
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Table of C<>ntenlS
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Dated:
November 10,2008
Dated: November 10, 2008
Dated: November 10, 2008
UNITED WESTERN BANCORP,INC.
lsI ScotT. Wetzel
ScotT. Wetzel
President and
Chief Executive Officer
(Principal Executive Officer)
lsI William D. Snider
William D. Snider
Chief Financial Officer
(Principal Financial Officer)
lsi Benjaniin C. Hirsh
Benjamin C. Hirsh
Chief Accounting Officer
(Principal Accounting Officer)
55
2153
Table of Contents
Exhibit
Number
INDEX TO EXHIBITS
Description


..

i{;x:;"'¥(\;

• Filed herewith.
S6
(Back To Top)
Section 2: EX-31.1 (CEO CERTIFICATION)
E:dIiblt 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 IO-Q of United Western Bancorp, Inc.;
2. Based on my knowledge, this report does not contain any untrue of a fact or omit. to state a fact necessary to milke the statements made, in light of
the circumstances under which such statements were made, not mlsleadmg as With respect to the penod covered by thiS report; .
3. Based on my knowledge, the financia.1 statements, and other finan?ial inc!uded 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 m 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 13a-15(e)
and 15d-15(e» 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 is being prepared;
b. de,signed such internal over reporting. or such internal cont.rol over reporting to be designed under our supervision, to provide
reasonable assurance regardmg the rehabdlty of finanCial reportmg 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 fis.cal quarter that has
materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
I. 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 atq\itors 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 Scot T. Wetzel
ScotT. Wetzel
President and Chief Executive Officer
(Principal Executive Officer)
November 10, 2008
Section 3: EX-31.2 (CFO CERTIFICATION)
2154
Exhibit 31.1
, CER'J'll1ICATION
I, William D. Snider, CbiefFinancial Officer ofUnited Western Bancorp, Inc. (the "Registrant"), certify that:
1. I have reviewed this report on Form 10-Q 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 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 in this report, fairly present in al1 material respects the financial condition, results of
operations and cash flows of the Registrant as of, and for, the pcnods presented IR 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 13a-IS(e)
and ISd-IS( e» 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 is being prepared;, '
b. designed such internal conn:ol over reporting, or such intemal over reporting to be designed under our supervision, to provide
reasonable assunmce regardtng the reliabIlity of finanCIal reporting and the preparation of finanCIal statemFts 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 tl! materially affect, the registrant's intemal control over financial reporting: and
S. The Registrant's other certifying officers and I have disclosed, based on our most recent evaluation of intemal control over fmancial 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 !he design or of control over financial reporting which are reasonably likely to adversely
affect the Registrant's abiltty to record, process, summanze and report financial IRformation; and
b. any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's intemal controls over financial
reporting.
lsi William D. Snider
William D. Snider
CbiefFinanciai Officer
(Principal Financial Officer)
November 10, 2008
Section 4: (CAO CERTIFICATION)
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 10-Q of United Western Bancorp, Inc.;
2. 'Based on my knowledge, this report does not contain any untrue of a ?laterial fact or omit, to state a fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not mlsleadlRg as WIth respect to the penod 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 13a-1S(e)
and ISd-IS(e» for the Registrant and have: . ,
a. designed such disclosure controls and or such c.ontrols and procedures to be designed under our supervision, to ensure that material
information relating to the Registrant, IRcludtng Its consolidated 8ubsldlanes, IS made known to us by others within those entities, particularly during the period in
which this report is being prepared;
b. designed such internal control over financial reporting or caused such internal control over fIRancial 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
2155
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
I. 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 To!!)
a. all significant deficiencies and material weaknesses in !he design or operat!on. of inteT?al control over financial reporting which are reasonably likely to adversely
affect the Registrant's ability to record, process, summanze 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.
/s/ Benjamin C. Hirsh
Benjamin C. Hirsh
Chief Accounting Officer
(Principal Accounting Officer)
November 10, 2008
Section 5: EX-32.1 (CEO 906 CERTIFICATION)
Exhibit 31.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTl9N 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of United Western Bancorp, Inc. (the "Company") on Form 10-Q for the quarter ended September 30, 2008, as filed with the Securities and
Exchange Conunission on the date hereof (the "Report"), I, Scot T. Wetzel, President and Chief Executive Officer ofthe 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 IS(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: November 10, 2008
(Back To Top)
/s/ Scot T. Wetzei
Scot T. Wetzel
President and Chief Executive Officer
(Principal Executive Officer)
Section 6: EX-32.2 (CFO 906 CERTIFICATION)
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 Quarterly Report of United Western Bancorp, Inc. (the "Company") on Foun IO-Q for the quarter ended September 30,2008, 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 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 ofthe Sarbanes-OxJey Act of 2002, 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
2. The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company.
2156
Dated: November 10,2008
@ackToTop)
lsi William D. Snider
William D. Snider
ChiefFimmcial Officer
(Principal Financial Officer)
Section 7: EX-32.3 (CAO 906 CERTIFICATION)
Exhibit 31.3
CERTIFICATION PURSUANT TO
18 U.s.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION !HIli OF THE SARBANE8-0XLEY ACT OF 1001
In connection with the Quarterly Report of United Western Bancorp, Inc. (the "Company") on Form 10-Q for the quarter ended September 30 2008 as filed with the Securitiea and
. Exchange Commission on the date hereof (the "Report''), I, Benjamin C. Hirah, Chief Accounting Officer of the Company, certify, pursuant ~ 18 U:S.C. Section 1350, as adopted
purauant to Section 906 of the Sarbanes-OXley Act of 2002, that:
I. The report fully complies with the requirements of Section 13(a) or IS(d) of the Securities and Exchange Act of1934; 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: November 10, 2008
@ackToTop)
lsI Benjamin C. Hirah
Benjamin C. Hirah
Chief Accounting Officer
(Principa:t Accounting Officer)
2157
TabC
Exhibit 82
2158
UWBK 100Q 6/30/2009
Section 1: 10-Q (UWBK Q2/2009 FORM 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
. Washington, D.C. 20549
FORMIO-Q
Ix) QUARTERLY REPORT PURSUANT TO SECTION 13 OR IS(d) OF mE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2009
OR
II TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Colorado
For the transition period from _______ to ______ _
Commission file number: 0-21231
UNITED WESTERN BANCORP, INC •.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization)
700 17th Street, Suite 2100
Denver, Colorado
(Address of principal executive offices)
Registrant's telephone number, including area code: (303)
84-1233716
(LR.S. Employer
Identification No.)
80202
(Zip Code)
Indicate by check mark whether the registrant (I) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 durin!!. 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 [ 0 ] No [ ]
IOclicate by check mark whether registrant submitted el.ectronically posted 00 its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of RegulatIon SoT §ofthls chapter) durmg the precedmg 12 months (or for such shorter period that the registrant was required to submit and post such
files). Yes [0] No [ ]
(Indicate by check mark whether the registrant is a large filer, an accelerated filer, Ii filer or a smaller reporting company. See definition of "large
accelerated filer, "accelerated filer" and "smaller reporting company" 10 Rule 12b-2 of the Exchange Act. (Check one): . .
Large accelerated filer [ ] Accelerated filer [0] N on-accelerated filer [ ] Smaller reporting company [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 oflbe Exchange
Act). Yes [ ]No[O]
Number of shares of Common Stock (SO.OOOI par value) outstanding at the close ofbusinesk on 7, 2009 was 7,345,874 shares ..
-1-
2159
ITEM \. Financial Statements - OJnauditedl
Consolidated Balance Sheets .
June 30, 2009 and December 31, 2008.
Consolidated Statements of Operations
Quarter and six months ended June 30, 2009 and 2008
Consolidated Statements ofSbareholders' Equity
Six months ended June 30, 2009
Consolidated Statements of Cash Flows
Six months ended June 30, 2009 and 2008
Noles to Consolidated Financial Stalements
PART I· FINANCIAL INFORMATION
ITEM 2. M Bnagement's Discussion and Analysis of Financial Condition and Results of Operations
ITEM 3. Ouantitative and Qualitative Disclosures about MarkefRisk
ITEM 4. Contro Is and Procedures
ITEM 1. Legal Proceedings
ITEM IA. Risk Factors
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
ITEM 4. Submission of Matters to a Vote of Security Holders
ITEM S. Other Information
ITEM 6. Exhibits
SIGNATURES
PART U - OTHER INFORMATION
-2-
2160
3
4
6
7
9
37
60
60
61
61
7S
7S
7S
76
77
Part I - FInancial Information
Item 1. Financial Statemenn- (Un8ndlted)
United Western Bancorp, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands. except share information)
-3-
2161
December 31,
United Western Bancorp, Ine. aDd Subsidiaries
Consolidated Statements of Operations
(Unaudited)
(Dollars in thousands. except share in/ormation)
Quarter Ended
See accompanying notes to consolidatedfinancial statements.
-4-
2162
Six Months Ended
United Western Bancorp, Inc. and Subsidiaries
Coosolidated Statements of Operations
(Unaudited)
(Dol/ars in thousands. except share in/ormation)
Quarter Ended Six Months Ended
June 30, June 30,
. Z009 ZOOB . . Z009 100B
..... .. :; ...... ,.: .... :-.:· .. ... · .. ·' .. ·.:··,.· •..•. t·: .... ·.·.:.'· .. ... ..:· ..·:.·.· .. ·.t!:=,::i!
,:;A:":'· .. _ -. . -.' _ ',;
.; .... , .. ,;:' .. ,.,.i.....;: •. . ';;;:Ym',):'jj;$t;&
Net income _ assuming dilution $ 0.55 $ 0.42 $ 1.00 . $ 0.88'
Weightild - basic 7,182,516, .1!.198,J.'-7 . 7,169,446 . 7;J.ff1,878
;;;t:;'tb'·;,;;'r;-:;\.'::' :;':.•

-5-
2163
United Westen Bancorp, Ine. and Subsidiaries
Consolidated Statements of Shareholders' Equity
(Unaudited)
(Dollars In'thousands, except share information)
Common Stock
Additional
Paid-In
Capital
Retained
Earnings
Shares
Amount
Six Months Ended Jnne 30, 2009
See accompanying notes to consolidatedjinancial statements.
-6-
2164
Accumulated
Other
Comprehensive
Income (loss) Total
Comprehensive
Income
United Western Baneorp, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in thousands)
.• ·;
Net Income
••• )i.···.·.· ..............•.......•.......... > ....
nlconcile ..
. . .'
Depreciation ..... ' .' ........ '.' ..................•..
• < .' •...•) .. ' .•· .. ·.C· ."'" . ' ..
W
,\mQrtq:all\loofm9rtgilge ........• ".';' ..•..•...... '.'
Lower of cost or fair value adjuslmenton loans heldfor
Gaill orisale9fl9i11ls ......•........••. '. '.
sale of securities available for sale
, (JaillonsalllotihWStmllnt ... " •.•.
J\f '. e9
..:... • :.... •. .•.• ........, .••... ......... ..••. . ....•.
Loau f?fsale., .....•..•.. ". ....., .......•..•.•. , .....••.....•

.•..••....•.....•..........•...•...•.•.............................•.........• '

Decrease in other liabilities and income tax payable
.•
,
•...

Proceeds from sale of available for sale securities
••·.·····.·.X?,:'·:'<':, •.•• ' ..
maturity andprepayment ..• '. ' .. '.
9fl\eJdl9watiJrt¥ ..•....•........ '< ................. , .................... , .....
Proceeds from the and prel'aylTlentofheld
. .... .. .
andequipment .......•...

Net cashfromconiinuing activities
.. ... ..... .... . ...................... .
See accompanying notes to consolidatedfinancial statements.
-7-
2165
'f
Six Months Ended June 30, 2009
2009 2008
.,,2N:'s
(;tMZ?t
- ..719'
705
!(),4S9 .
.. 603
1.382
(325)
...
46,980
.
614
(17,2i.3)

' .. '(iQ,@)
(1,504)

(246,309) ..
· ...
'4'%J1
7,133
55,243
'16;999
(2,26O)"
..
110,656
6,428
. (l,®j.

707 .


'565

(3)
.'

(63)
·····:(11;$06)
(4,298)
(446,iM

8,473
@;gm;
42,202

(4,877)
·••.•
(140,571)
United Western Bancorp, Ine. and Subslcllaries
Consolidated Statements of Cash Flows - continued
(Unaudited)
(Dollars in thousands)
Six Months Ended June 30, 2009
'fi!111:In<\':"Eij; 'Jj§:?iH;i ',e;,' , ,'.", ""'",'" ""." ",,' ". ," .. ,,,"
Loans transferred to foreclosed real estate and other assots $ , . ",:,;,,:'
,,:t;;':;;. ',;' ,,:,;, ..
Noto receivable received in sale of assets of discontmued operations $ 46,050 $ -
:,' ',; ,;; .': ,:,' ,:"1, : ilK"
'!;!';2+,', i,;;.C';;,.';'·",·;·;,:·;,";i:';;," . ''','::' 'Y)",<;;.;;,:;';.;'i,L,:;i';·"S ... "i""'; i,- $" ';\i,"ii)
,.' :i' ;'; :: ,'.:, ');;iib;;;;;;:"";:: tY;:li:f!:$ ';;:':;;.;.;(1,< 'i'. .; .,,;;:.
See accompanying notes to consolidatedjinancia/ statements,
-8-
2166
1. Basis of Presentation and Slgnltieant Acconnting Policies
· United Western Bancorp, Ine. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
June 30, 2009
United Western Bancorp, Inc .. (the "Company") is a unitary thrift holding company and, through its subsidiaries, a diversified financis! services company headquartered in Denver
Colorado. The Company's operations are conducted primarily through United Western Bank® (the "Bank"), UW Trust Company ("UW Trust") (formerly known as Sterling Trust
Company), see Note 17 Discontinued Operations - Sale of UW Trust Assets for further discuBsion, Matrix Financial Services Corporation ("Matrix Financial"), and UW Investment
Services, Inc. ("UW Investment''), all of which are wholly owned subsidiaries of the Cmnpany.
Through tbe 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 area the Eastern slope of Colorado's Rocky Mountains - from Pueblo to Fort Collins, and includes the
metropolitan Denver marketplace. At June 30, 2009, tbe Bank had eIght branches m the Colorado Front Range marketplace (downtown Denver, Boulder, Cheny Creek, Loveland, Fort
Collins Longmont, Hampden Office and Centennial) and a loan production office serving Aspen and tbe Roaring Fork Valley. We plan to grow the Bank network to an estimated ten to
twelve bank locations over the next three to five years. We originate Small Business Administration ("SBA") loans on a national basis. In addition to the community-based
banking operations of the Bank, we also offer deposit services to institutional customers, as well as custodial escrow and paying agent lines of business through UW Trust. .
We refer to certain assets as "wholesale," by which we that prior December 2005 was mainly engaged in acquiring assets (e.g .• residential loans, multifamily loans, and
other loan assets) primarily on an indirect basis through relationshIps WIth large mortgage ongmators, loan brokers, and other market participants. .
The consolidated financial statements of the Company and its subsidiaries in this Quarterly Report on Form IO-Q have not been .audited by an independent registered public accounting
finn but in tbe opinion of management, reflect all adjustments necessary for a fair presentation of the Company's financial position and results of operations. The consolidated financial
have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and with the instructions to Fonn 1O-Q adopted
by the Securities and Exchange Commission ("SEC'). Accordingly, these financis! statements do not include all of the infonnation and notes necessary to constitute a complete set of
financial statements under GAAP applicable to annual periods. Accordingly, they should be read in conjunction with the financial infonnation contained in the Company's Annual
Report on Fonn 10-K. In the opinion of management, .all or only recurring disclosed in this Fonn 1O-Q) necessary for a fair
presentation have been included. The results of operations for the mtenm herem not necessanly mdlcative of results that may be expected for the full year or any
future period. The Company has evaluated subsequent events for potential recogmtion and/or dIsclosure through August 7, 2009, the date the consolidated financial statements
included in this Quarterly Report on Fonn 10-Q were issued. .
Significant Accounting Estimates
The Company has established various accounting estimates that govern the application of GAAP in the preparation and presentation of the Company's consolidated financial
statements. Certain accounting estimates involve significant judgments, assumptions and estimates by management that have a material impact on the carrying value of certain assets
and liabilities disclosures of contingent assets and liabilities, and the reported amounts of income and expen.ses durin.g the reporting period which management considers to be critical
accounting estimates. The judgments, assumptions and estimates used by management are based on historical experience, management's 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
, materially 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.
The Company views the allowance for credit losses, the valuation of loans held for sale, the valuation of investment securities and the detennination of temporary vs. other"than-
temporary impairment of securities as critical accounting estimates that require· significant judgments, assumptions and estimates be used in preparation of its consolidated fmancial
statements. See further detail in this Note for a detailed description of the Company's process and methodology related to the allowance for credit losses and the valuation of loans held
for sale. See Note 3. Investment Securities for a detailed description of the Company process and methodology related to the valuation of investment securities lind other-than-
temporary impainnent of securities.
-9-
2167
Allewanee 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 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 Statement of Financial AcCounting Standards ("SFASj 5, "Accounting for
Contingencies. " and SFAS 114, "Accounting by Creditors for Impairment of a Loan." as amended by SFAS 118. The level of the allowance reflects management's continuing
evaluation of loan loss experience, specific credit risks, current loan portfolio quality, industry and loan type concentrations, economic and 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 impairment, and a component representing an estimate of
inhe:.ent, 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 losses based on loss migration analysis where loss factors are Updated regularly
based on actual experience. The analysis examines historical loss experience and the related internal gradings of loans charged off. The loss migration analysis also considers inherent
but undetected losses within the portfolio.
Commercial loans with similar risk characteristics (e.g., multifamily, construction and development, commercial real estate and conuriercial) 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 ofloans charged off and other factors, including our asset quality trends and national and local economic conditions.
The portion of the allowance established for loans messured for reflects losses resulti?g analyses developed through specific allocations for individual loans.
The Company considers a loan impaired when, based on 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 usIDg the f&lr 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 the loan rate, or the market price of the loan. All loans considered impaired are included in nonperfnrming loans. The Company
generally evaluates its residential loans .due !" their homogeneous however,. 'may be considered for iJJ.!pairment based on the facts and
circumstsnces of the loan. Accordingly, potentially Impaired loans of the Bank may IDclude residential loans, commefCIalloans, 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 estit?ated but losses B?d the imprecision in the credit risk models
utilized to calculate the allowance. This component of the allowance IS pnmanly 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 growing 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 wholesale lending portfolios.
Portions of the allowance may be allocated for specific credits; however, the entire allowance is available for any credit that, in management's judgment, should be charged off. Credit
losses are charged agaiost the aUowance when management considers the loan uncollectible. While management uses ita professional judgment and the information available; the
ultimate adequacy of the allowance is dependent upon a variety of factors beyond the Company's C!)ntrol, including the performance of the Bank's loan portfolios, national and
Colorado economIc conditions, changes in interest rates and other factors. "
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2168
Loans Held for Investment
, Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are classified as loans held for investment. These loans are reported at the
principal balance outstanding net of ?neamed discounts and is accrued. on the unpaid origination t:ees, net of certain direct
originstion costs and purchase premIums, are deferred and recognized m mterest mcome usmg the level-YIeld method WIthout antiCIpating prepayments and mcludes 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 in accordance with FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requlreinents for Guarantees. Including
Indirect Guarantees of Indebtedness of Others-an interpretation of FASB Statements No.5. 57. and /07 and rescission of FASB Interpretation No. 34. "
. .
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 ofIncome - Noninterest expense as lower of cost or fair value adjustment.
Loans are considered sold when the Bank 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 loan 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.
Community Bank Loans
Community bank loans include commercial real estate loans, construction and development loans, co1DlllCrcialloans, multifamily loans and consumer loans. Within this population are
loans originated by the Bank's SBA division. The majority of community bank loans are o?ginated held for investment Currently, we intend to hold for the foreseeable future
or to maturity all community bank loans, except SBA 504 loans and the guaranteed portions of Ortgtnated SBA 7a loans. We generally elect to sell ,certain SBA 504 loans and the
guaranteed portions of SBA 7a loans. These sales assist the Company in managing industry concentrations, capital, and interest rate'risk, and are a normal part of our operations. At
Iune 30, ZOO9 and December 31, ZOO8, community bank loans included multifamily and SBA originated loans totaling $8Z.6 million and $83.7 million, respectively, that were classified as
held for sale.
Wholesale Loans
Wholesale loans include purchased residential loans and purchased guaranteed portions of SBA 7a loans. We did not acquire any wholesale loans in ZOO9 or ZOO8 other than loans we
are required to repurchase from o?r GNMA portfolio. Such are as principal and interest. At Iune 30, Z009 and December 31, 2008,
wholesale 10Iins included residential loans totahng $201.2 mtlhon and $212.1 mtlhon, respectively, whIch were classIfied as loans held for sale. See Note 5 - Loans to the consolidated
financial statements for a break out of all wholesale loans.
Income Taxes
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 for income tax purposes. The cQllsolidated effective tax rate is affected by the resolution of
uncertain tax positions identified under F ASB Interpretstion ("FIN") 48, "Accounting for Uncertainty in Income Taxes" the level of utilization of New Markets Tax Credits and the level
of tax-exempt intereat income in proportion to the level of net income.
-11-
2169
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
carryforward&, and deferred tax liabilities are recOgnized for taxable tel1!porary differences. are the the reported amounts of aasets and
liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, m the OpIDlon of management, It IS more likely than not that some portion or all of the
deferred tax assets will not be realized. At June 30, 2009 and December 31, 2008, management. believed it was more likely than not that the deferred taxes would be realized and,
accOrdingly, there was no valuation allowance. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
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 amount of the position be sustained. The of tax is recognized statements in the period during
which, based on all available eVIdence, management believes It IS more likely than not that the posItion will be sustamed upon examination, IDcluding the resolution of appeals or
Iitigatioli processes, if any. The evaluation of a tax position taken is considered. by itself and not offset with .other positions. Tax that meet the more-likely-than-
not recognition threshold are measured as the largest amount of tax benefit that IS more than 50 percent likely of being realized upon settlement the applicable taxing 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.
EarnlRgs Per Sbare
Effective January 1,2009, the Company adopted FASB Staff Position ("FSP") Emerging Issues TaskForce ("EI1F') 03-6-1, "Determining Whether Instruments Granted In Share-Based
Payment Transactions Are Secur!t!es. n FSP EITF proyides that payment awards that contain non-forfeitable rights to dividend equivalents,
whether paid or unpaid are partlclpatmg secuntles and shall be mcluded m the computation of earnmgs per share pursuant to the "two-class" method is specified in SF AS No. 128
"Eamings Per Share."' 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 onnonvested shares, and therefore, the Company's
nonvested restructured stock awards qualifY as participating securities under FSP EITF 03-6-1. All previously reported earnings per common share data has been retrospectively
adjusted to conform to the new computation methodology.
Reclassifications
Certain reclassifications have been made to the consolidated financial statements and related notes for prior quarters to conform to the current quarter's presentation, including the
effects of discontinued operations. See Note 17- Discontinued Operations to the consolidated financial statements for a discussion of the impact of the sale ofUW Trust assets.
In prior years' financial statements, the Company presented the valuation allowance to reduce loans held for sale to the lower of cost or fair value in two components, one an
. for credit losses that separately considered credit loss exposure and one valuation allowance that separately considered market risk factors. Management has reclassified prior period
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. Also, included in these
reclassifications was a retrospective change in the presentation of loans held for sale. In prior years, we presented community bank loans and wholesale loans on the face of the balance
sheet, with details of the components of loans held for sale and loans held for investment in the In !he June 30, 2009 financial statements, we presented loans held for sale
and loans held for investment on the face of the balance. sheet. In Notes 4 and S to the consolidated finanCIal statements, we a break-down of community bank loans and
wholesale loans within loans held for investment and loans held for sale.
In the financial statements for the quarter and six months ended June 30: the Pf?vision for credit losses was presented as $2,080,000 and $3,616,000, respeclively.:In the financial
statements for the quarter and six months ended Juno 30, 2009, the provISIon for credit losses for the quarter and six months ended June 30,2008, is presented on the face of the income
statement as $2,132,000, and $4,023,000, respectively, which is attributed to the allowance for credit losses for loans held for investment.
In the financial. statements for the quarter and six months elided June 30, 2008, the of cost or fair value adjustment was disclosed within other general and administrative expenses
of noninterest expense as $207,000 and $974,000, respectively. In the financia! statements for the quarter and six months ended June 30, 2009 the lower of cost or market adjustment for
the quarter and six months ended June 30, 2008, is presented on the face of the Income statement as $154,000 and $565,000, respectively.
-12-
2170
1. Earnings Per Common Share
Earnings per common share is computed using the two-class method prescribed 128, :'Earnlngs Share." Basic earnings per share is computed by dividing net earnings
allocated to common stock by the weighted-average number of common shares outstandmg dunng the apphcable period, excluding outstanding participating securities. Participating
securities include non-vested stock awards. Non-vested 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. The application of the two-class method did not have a material impact on the resulta for the periods shown below.
The following table sets forth the calculation of earnings per share. There were no dilutive securities for any period presented. Earnings allocable to participating securities were
included with (loss) income from continuing operations:
Quarter Ended June 30, Six Months Ended June 30,
1009 1008 1009 1008
(Dollars In thousands)
Stock options for 1,024,376 and 971,783 shares of common stock were not considered in computing diluted earnings per common share for June 30, 2009 and June 30, 2008, respectively,
because they were antidilutive.
3. Investment Securities
The following table summarizes the amortized cost mid fair value of the available-fur-sale investment securities portfolio at June 30, 2009 and December 31, 2008, and the corresponding
amounts of unrealized gains and losses therein:
Amortized
Cost
June 30, 1009
Gross Gross
Unrealized Unrealized
Gains Losses
Fair
Value
December 31, 1008
Gross Gross
Unrealized Unrealized
Gains Losses
Fair
Value
proceeds from sales of securities available for sale were $373,000 for the three months and six months ended June 30, 2009. A gross loss of $46,980,000 was realized on the As
previously announced on July \, 2009, we sold \ 00% of our 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 by nationally rating at the time of acquisition. However, in the period from April 2008 through June
2009 the securities were progressively downgraded until they were graded slgmficantly below IDvestment 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, management elected to sell the securities, which provided regulatory capital relief to the Bank in spite of the
loss incurred.
There were no securities sold or called during the three months or six months ended June 30, 2008.
-13 -
2171
The following t a b l ~ summarizes the amortized cost and fair value of the held-to-maturity investment securities portfolio at June 30, 2009 and December 31, 2008, and the corresponding
amounts of unrealized gains and losses therein:
June 30, 1009
Gross
Unrealized Fair
December 31,1008
Gross
Unrealized
At June 30, 2009 and December 31, 2008, substantially all of the Company's inveatment securities were pledged to secure public deposits, FHLBank borrowings,repurchase agreements
and for other purpnses, as required or permitted by law.
The following table presents 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:
Mortgage-backed securitiea -
JUDe 30, 1009
Less than 12 months
12 months or more
Estimated
Fair
Value
Unrealized
Losses
Estimated
Fair
Value
Unrealized
-14 -
2172
12 months or more
Estimated
Fair .
Value
Unrealized
Losses
The amortized cost and estimated fair value of investment securities portfolio as of June 30, 2009, are shown by expected maturity. Expected maturities may differ from contractual
maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

\Vithin lXear
Qy<li:\ ..
10 years
" ' ,
Subtotal .
.
thnlUgh I 0
.,. '. .
Subtotal
fo\!il.
Temporary vs. Other-Than-Temporary Impairment
Available for Sale Held to Maturity
Amortized
Cost

213
$
,-' ':,'.", ":'"
844'
: -c,:\", . ';w-"-..;;...;;..;;...;..;.;;;.;;;3,,,.}J.;!:);;;i_,81 '-:-;:,':::,:;'?
40,731
Estimated
Fair
Value
Amortized
Cost
(Dollars in thousands) ,
$
211
861

38,146
" ',394;$:H,
394,334
Estimated
Fair
Value

336,295
The Company views the determination of whether an investment security is other-than-temporarily impaired as a critical accounting policy, as the estimate is susceptible
to significant change from period to period it requires to make assumptions estimates in the preparation of its consolidated financial
statements. Management considers whether an IOvestment secunty IS other-than-temporanly ImpaIred under the guIdance promulgated in FSP SFAS 115-2 and SFAS 124-2,
"Recognition and Presentation 0/ Other-Than-Temporary Impairm.ems." The Company securities in its investment securities portfolio for impairment at least on a
quarterly basis, and more frequently when mark.et condItIons warrant such an An is if the fair value of the security is less than its carrying
value at the financial statement date. When a security IS ImpaIred, the Company then deternunes whether thIS ImpaIrment IS temporary or other-than-temporary.ln estimating other-than-
temporary impairment ("OTTI") losses, assesses it intends to it is more likely than n?t that it will be. to sell, a security in an unrealized loss position
before recovery of its amortized cost baSIS. If eIther cntena IS between amortIzed cost and falf value IS recognized in earnings. For securities that do
not meet the aforementioned criteria, the amount of ImpaIrment recogmzed In eamlOgs IS hmlted to the amount related to credit losses, while impairment related to other factors is
recognized in other comprehensive income. 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 ofthe 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.
Management considers whether an investment security is within the scope of EITF 99-20, "Recognition 0/ Interest Income and Impairment on Purchased BenefiCial Interests and
Beneficial Interests That Continue to Be Held by a Trans/eror In Securitized Financial Assets," and EITF 99-20-1, "Amendments to the Impairment Guidance 0/ EITF Issue No. 99-
20, .. at the time of purchase by review of the rating assigned. To date, all securities acquired by the Company have been agency securities or had an assigned rating of AA or higher at
the time of acquisition.
As of June 30, 2009, the Company's securities portfolio consisted of 110 separate securities, 82 of which were in an unrealized loss position. The Company's securities are discussed in
greater detail below:
- 15-
"
2173
Mortgage-backed Securities - Agency . ... ...
At June 30,2009 the Bank owned 35 securities, with an unpaId prmclpal million, Issued by U.S. government-sponsored sponsored entities and agencies, primarily Fannie
Mae and Freddie Mac, institutions which the U.s. government has affirmed Its commitment to support. Of these 35 securities, seven have an unrealized loss each of which is less than
250 basis points. Because the decline in fa!r is to in interest rates !lIiquidity, not quality, and because the Company does not have the intent to
sell these mortgage-backed securities and It IS likely that It WIll not be reqUIred to sell the secunties before thelT antIcIpated recovery, the Company does not consider these securities to
be other-than-temporarily impaired at June 30, 2009.
Mortgage-backed Securities - Non-agency
The Company's mortgage-backed securities portfolio includes 72 non-agency securities, of which 70 were in an unrealized loss position, with a fair value of$341 million which had gross
unrealized losses o(approximately $62 million. At June 30, 2009, based on the carrying value and the lowest rating assigned, the securities portfolio consisted of 44% securities rated A
or higher, 8% BBB rated securities and 48% securities rated below investment grade. Based on the highest rating assigned, approximately 82% of the portfolio is investment grade.
Overall delinquencies for this subcategory remain satisfactory; however, reflecting the overall U.S. mortgage market, delinquencies increased in the current quarter. Management
expects these delinquency levels to level off in the last of 2009 base.d on !o date, on the of loan restructuring programs underway. At June
30, 2009, management expects full recovery as the secunlles approach theIr maturity date or repncmg date or If market Yield for such mvestments decline.
Included in collateralized mortgage obligations - private, held to maturity were securities that are collateralized by prime CMO securities. These securities have an amortized cost of$201
million of prime securities and $39 million of Alt-A securities, of which $166.9 million 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. continue to made for each B.ased on our analysis and our review of the independent analyses
performed by third parties on these securities and other our .the <?ompany .the dechn? m fa!r value of securities deemed temporarily impaired is due to
current temporary conditions in the marketplace. For the $180 million of secunhes m thIS category WIth fair value pnce estImates below amortized cost for twelve months or more less
than one percent cumulative losses have been to date. Credit support for these increased from 5.3% at origination to 6.7% at June 30, 2009. The vast majority of
this category consists of prime loans, with a weIghted average loan-to-value of 69% at ongmation, and only 3% of loans with a loan-to-value ratio in excess of 80% at origination.
Overall delinquencies for this subcategory remain however, reflecting the overall U.S. mortgage market, delinquencies increased in the quarter ended June 30, 2009.
Management expects these delinquency levels to level off m the last half .o.f 2009 based theIr and o? the effects loan restructuring programs
underway. At June 30, 2009, management expected full recovery as the secunlies approach theIr matunty date or repncmg date or If market YIeld for such Investments decline.
Included in mortgage-backed securities - private, held to maturity, were securities that are collateralized primarily by prime hybrid mortgages. These securities have a total amortized
cost of $135 million, of which $114 million, or 85%, have received one or more ratings declines by the ratings agency since acquisition. This category includes five securities
collateralized by Alt-A mortgages totaling $20 million. continue be made for all Of. these securit!es .. on our analysis and our review of the independent analyses
performed by third parties on these securities and other ID portfoho, the believes dechne. ID fau: value of deemed temporarily impaired is mainly due
to current temporary conditions in the marketplace. While $100.5 mllhon of these secuntles has had a faIr value pnce estimate below amortized cost for twelve months or more, current
credit support levels have increased from 5.9% at to 7.1% at June 30,2009. Such support are expected to continue to increase as subordinate tranches to these
securities payoff and cash flows are allocated wJthm the CMO structure. Management expects dehnquency levels to level off as private loan restructuring programs and the
Homeowners Affordability and Stability Plan are implemented. Within this category, management recognized OTTl on two securities where it was deemed appropriate due to various
factors in our analysis. .
During 2008, the Company incurred OTT! on two private-label 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 OTTI 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 deemed OTT! based on the extent and duration of the 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. These two securities evidenced
further impairment at June 30,2009, after the adoption ofFSP FAS 115-2 and, accordingly, the Company incurred a charge of$603,000, reflected in other noninterest income, to reflect the
credit loss of the additional OTT!.
-16-
2174
Other Securities '
The Company's SBA pooled securities consist I securities each was in an unreal!zcd position. Such securities are guaranteed as to principal by the SBA. Because the
decline in fair value is attributable to changes m mterest rates and IlltqUlllity, and not Credit qualtty, and beca\1se the Company does not have the intent to sell these SBA pooled
securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-tempilrarily
impaired at June 30, 2009.
The table below presents a roll forward of the credit losses recognized in earnings for debt securities held and not intended to be sold:
Otber-tban-temporary
Loss Reeognlzed as
Credit Loss In Earnings
(Dol/ars illlhousallds)
:t;' .• :"; :Yr ", ',;;' ';','" ';.;"' •• ,'"
Previously recognized other-than-temporary loss,
";:'; ,', ',,;, ".:::.:'T J::iJ{' 'L:';;"'l{;,';;r:'.
In the event securities demonstrate additional deterioration througb an increase in defaults or loss severity that indicate the Company will not recover its anticipated cash flows or if the
duration of relatively significant impairments in these securities does not reverse, the Company will incur other-than-temporary impairments, which may result in material charges to
earnings in future periods.
4. LoaDS Held for Sale
Loans held for sale consist of the following:
June 30, 2009 December 31, 2008
-17 -
2175
Activity in the valuation allowance to carry loans held for sale at the lower of cost or fair value is summarized as follows:
Six months Ended
5. Loins Held for Investment
LoanS held for investment consist of the following:
June 30, 1009 December 31, 1008
'.' .... ". ".;... .. ... ,.:: · ..... ;';'.:'Zpu, ..'. r: "
Commercial real estate ." ••.•' •. '$ 453,283 $ 434,399
.. :t;;7:;·;:i.;'.";E" :';"'f}',::;:···.:' '::'jf;di)ii:i;:S'}:::;Y;;;!iE ""'.' .... •• ; •. •.•. ,' ...•::,'::::,." .•. ".;,.,., •• , :':""","'.0, .' .••:L,;;;"' .••·:;, ;, .. ," :'Xi
.
e=n,',' ,'0.","£.',''' •• "-",,,erc, ."" .... ," jaJ,;" ...' ••.•..: •..••! ...... ;, •. , ... ',...•.... '.',:, •..•, ... , .•:.:.,' .•.•.• ':.',.,.....•..'.,'.:.' .....' ....: •.• ,.i'.,',:, •••,y .•.•.• , •.•. ' .•, •• , .•', •• y.' .•:./ ..... ,.:c.•' ...,'.'.,....,'.'.'.:.,.. '.'.,., .•.'. '.,..:.:.:,.· •• ,·, ..·.!,1.·,:••'.'".:·".•',,'.,.• ·••• , ••. ·,•.. .••t.7,••" ••.•• •.•,:,",;, •. ,.:.:;.. ..:, .. ..••.""":", ;.;;.',;.,:;, •. ,.:.:>.' .•.•.' .. : •.·.:,r",.' .• .. ..". ' •..·.i .. \,.: .••,: .. , .• ,..... . •..:.7,;'./,;f;':.Y,.,· "'.' .' , .. ,. w ., ,!,.,•••, ..•.. ',.........' 161,308 134,435 ... UJlI__ ,., ." ' ....... " ..... ,'.,'. . '. '" . ..' '" ", . '·','<ii/'l;.,';'· - ,.
.. , ... , ''''Y'i'':' ;:7::·;(;:;:: .. .•.• :;,':;, '. ,'7':; •• •. "."' ..
:;""i'"'' LE#i],i;,c .,". c,' •.•.•.•.•. ,.... • •..•...••.• , .•. .. .. :
Ii""
:, .... ,.", ". ,' .......•. ,;;':; .:;\,""7;','2:.;:.;; ';:f; ;E::h.il;
Loans held for investment, net $ 1,240,356 S 1,233,301
Activity in the allowance for credit losses on ioans held for investment is summarized as follows:
Six months Ended
-18-
2176
The following lists infonnation related to nonperforming loans held for investment and held for sale:
June 30,2009 December 31,2008

The aggregate unpaid principal balance of accruing loans that past due 90 or more days was $6.7 million and $6.5 million at June 30, 2009 and December 31,
2008, respectively. These accruing loans are not mcluded In the balances ofnonperformmg loans above.
loans, as defined under SFAS No. 11.4, by for .ofa Loan," totaled $32.7 million and $3.3 million at June 30, 2009 and December 31, 2008,
respectively. The related allowance allocated .loans was SS.8.lI1!lhon. and $1.7 mtlhon at June 30, and 3 2008, respectively. There was no interest recognized
in the periods on loans while they were consIdered Impatn:tt. Incl.uded In one loan totahng .$11.2 mdhon, whIch was deemed impaired due to a concessionary rate
granted to the borrower during the first quarter of 2009. ThIS loan IS perfomung uuder Its reVIsed terms and rellUlJDS on accrual at June 30, 2009.
6. Mortgage Servicing Rights
,The activity in the mortgage servicing rights is summarized as follows:
Six months Ended
The estimated filir value of mortgage servicing rights atJune 30, 2009, was 58,187,000. The Company determined fair value in accordance with SF AS IS7. See Note 15 - Fair Value of
Financial Assets to the consolidated financial statements for a discussion of the fair value determioation.
During the six months ,eoded June 30, 2009 and 2008, the Company recognized originated mortgage rights of 573,000 and 563,000, respectively. The amounts of originated
mortgage servicing rights recognized in 2009 and wer:' the result of the of the portions of originated SBA 7a loans collateralized by mortgages. The mortgage
servicing rights were determined based upon the relative faIr value of the servlcmg asset m companson to the guaranteed portion of the loan sold, the unguaranteed portion retained,
and the sesvicing asset.
-19-
2177
The Company's servicing portfolio (excluding subserviced losns), is comprised of the following:

Principal PrlDclpal
Number Balance Number Balanee
of Loans Outstanding of Loans Ontstantlhig

The Company's custodial escrow balances shown in the accompanying consolidated balance sbeets at June 30, 2009 and December 31, 2008, pertain to payments held in escrow in
respect of taxes and insurance and the float on 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 custodIal accounts fluctuates from month to month based on the pass-through of the principal and interest payments to the ultimate
investors and the timing of taxes and insurance payments.
7. Deposits
Deposit account balances are summarized as follows:
June 30,1009 December 31, 1008
Weighted Weighted
Average Average
Amount Pereent Rate Amount Percent Rate

The following table presents concentrations of deposits at the Bank at the dates presented:
June 30, 1009 December 31, 1008
(Dollars in thousands)
;,:;,; " ";';",,',,' ;;F;;:::::;;': ,,;'i';tr;;';!l'Z: ';'};:;':;';Cl:.: ;': '::;"<. ,"
,"ij'::';';' ;,'::,;'l.··,····· .•.•,.':::,':::<, ' ...... :';:,:'. , .....•';.)'.
Other Deposit Concentrations 1,194,160 1,130,860
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. Included in this balance at UW Trust is a series of accounts for one life settlement agent for special asset aequisitions and with a balance of $917,000 and $30.4
million at June 30, 2009 and December 31, 2008,. Management elected to restructure relat!onship and certain elements of business with respect to this large life
settlement agent account. The restructured relationshIp will now allow the Company to pursue busmess m the same mdustry on a non-exclusive basis subject to approval by the Texas
Department of Banking.
-20-
2178
Matrix Financial Solutions, Inc. ("MFSr,) - 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 of2009.
Legent Clearing, u.c _ represents institutional depOsits received through Legent Clearing, u.c, 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 ftom six institutional relationships maintained by the Bank as of June 30, 2009 and December 31, 2008. Included in other
deposit concentrations are institutional balances ti"om Equity Trust, with balances of$841. 7 m i l l i o ~ and $822.8 million at June 30, 2009 and December 31, 2008, respectively. The balances
ftom Equity Trust include the custodial deposits associated with the UW Trust asset sale, which is discussed in Note 17 Discontinued Operations - Sale ofUW Trust Assets.
Included in certificate accounts are approximately $79.5 million and $35.0 million of broke red deposits as of June 30, 2009 and December 31, 2008, reapectively.
The nggregate amount of certificate accounts with a balance greater than $100,000 or more (excluding brokered deposits) was approximately $50.5 million and $40.1 miUion of June 30,
2009 and December 31, 2008, respectively.
8. FRLBank Borrowings
The Bank obtains FHLBank borrowings ftom 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 ftom FHLBank of Dallas. Certain long-term borrowings that existed at that time with FHLBank of Dallas
are still outstanding under their original terms.
The balances ofFHLBank borrowings are as follows:
lane 38,1009 December 31,1888
(Dollars in thousands)
Available unused borrowings from FHLBank of Topeka totaled $226,242,000 at June 30; 2009.
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9. Borrowed Money
Borrowed money is summarized as follows:
The Company's $30 millioo revolving line. of credit to a third-party financial institution was renewed on lune 29, 2009 until September 30, 2009. This facility is fo; general corpomte
purposes. The Company must comply with certsin financial and other covenants contained in the credit agreement including, among other things, the maintenance by the Bank of
specific asset quality mtios, and "well capitalized" regulatory capital mtios. Also, the credit limita the Company's ability to incur additiooal debt above specified levels. Thll
Company was in compliance witb the covenants as of June 30, 2009. The amendment to the credIt agreement calls for a payment of$5 millioo prior to September 30, 2009 at which time
the facility will be reduced to $25 million.
Assets sold under agreements to repurchase are agreements in which the Bank acquires funds by securities to another party under B simultaneous agreement to repurchase the
same securities at a specified price and date. The Bank's structured repurchase agreements each contam an option that is held by the counterparty to terminate agreement on the
call date or quarterly thereafter. The Bank enters into repurchase agreements and also offers B demand deposit account product to customers that sweeps their balances in excess of an
agreed upon target amount into overnight repurchase agreements.
The Bank structured repurchase agreements at lune 30, 2009 are as follows:
Counterparty IP Morgan JP Mortin Citilroi
"'<"""\ """', ,· ..1\i)j'!lOO';""'$,,,,,,,,,,,,·.,,,,,:,01!!!l!l·!,Iiij'j
Base interest rate ..."' .. ".'.".", .. '.,':,.•:: .. , ...... ...• , .•',',' .... , ••..,., .. ...",.. ........ .. : .. ........... ,.-.,"'·.,,", ..•,"... ..)r'·,',•. .. , ... .., .. ...••.. ,.:, .. ,."...• ,.: .. ,'... ',.,: •. ' .•. , •. ·.·.,..• :'::, .• •. :· .. .•. .•. .•• f.,.:...... ',' ...".'.,.,....... ,.,'., ..... ... '.·.',' ..,.::, . .m.'.4.··.: .. •. .••.• .•. ,' ... ' .... ',., .. ...•.".:; .. ,., ••.•. , .. ,: ..•.•. , .. .......••. ...;"""" ..'.'c., .. ,"" ..·.".'··"."a"'·' ... ,: .. · ....,., ..'.::-;f·.:"·."' .. , ......... ....!.··.·!j'.w..·· ..• , •. : ..... ,:., .•• , ....... ,
Call date . December 28,.2009 November 23, 2009 ... .' ... . November 23, 2009 "
10. JunIor Subordinated Debentures Owed to Unconsolidated Subsidiary Trusts
The Company sponsored three trusts that have as ?f June 2209. were in years 200" 2004 and 2005 for the purpose of issuing
corpomtion-obligated mandatorily redeemable caPital secunties (the capllll.l secunties ) to thIrd-party mvestors and IRvestmg the proceeds from the sale of such capitsl securities
exclusively 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 mte per .annum equal to the mterest 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 bas entered into agreements which, taken collectively, fully
and unconditionally guamntee the capital securities subject to the terms of each of the guarantees.
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The foilowing table presents details on the junior subordinated debentures owed to unconsolidated subsidiary trusts at Iune 30, 2009.
Trust II Trust VI Trust VIn

11. Regulatory Matters
The Company. The Company is a unitary thrift holding companyand, as such, is subject to the regulation, examination and supervision of the Office of Thrift Supervision ("OTS").
United Western Blink. The Bank is subject to various regulatory capital requirements administered by the ors. Failure to meet minimum capital requirements can initiate certain
mandatory, and possibly additional discretionary, aenons by regulators that, if undertaken, could a material effect on the Bank's and the Company's consolidate4 fmancial
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 regulatory accounting practices. The Bank's capital amounta and classification
are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1
capital (as defined in the to assets in of Tier 1 capital (as. in the regulations) to total assets (as defined in the
regulations). The Bank's Tier I capItal consISts of shareholder s equIty excludIDg unreahzed gaIns and losses on secunties available for sale, less a portion of the Bank's mortgage
servicing asset that is disallowed for capital.
The Tier 1 and .total capital ratios are calculated by dividing the respective capital amounts by risk-weighted assets. Risk-weighted assets are calculated based on regulatory
requirementa and include total assets, allocabid by risk weight category, and certain off-balance-sheet iteDlS (primarily loan commitments). The leverage ratio is calculated by dividing
Tier 1 capital by adjusted total assets.
The Bank has been notified by the OTS that, as of its most ll7ent regulatory. examination, it is as well capitalized under the regulatory framework for prompt corrective action.
Such determination has been made based on the Bank's TIer 1. total capItal, and leverage ratios. There bave been no .conditions or events since this notification that management
believes would change the Bank's categorization as well capitalized under the aforementioned ratios. For a .discussion of conditions or events that could change the Bank's
categorization please see Item II. - Risk Factors.
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To Be Wen Capitalized
For Capital Adequacy Under Prompt Corrective
Aetual Pureoaell AetionProvlslons
Amount Ratio Amount Ratio Amount Ratio
(Dollars in thousands)


12, Stock-Based Compensation
Stock Options
A summary of the Company's stock option and non-vested stock. awards activity, and related infonnation,'is as follows:
Balance January I, 2009
Sbares Available
. for Grant
1,027;MY7
Sb: Mouths Ended .June 30, 2009
Non-Vested Restricted Stock Awards Outstanding
Welgbted Average
Grant Date
NumberofSbares Fair Value
104,248 $ 19.84
Fully vested and shares expected to vest total approximately 975,000 at June 30; 2009.
Stock Optlens Outstanding
Number of Sbares
1,034,535
Welgbted Average
Exerdse Priee
$ 19.37
TIle Company's sluu:ebolders approved the 2007 Equity Incentive (the "2007 Planj at the 2007 annual meeting, which the Board of Directors subsequently amended on December
17, 2008, to make minor revisions for purposes of complying with Section of Internal Revenue Code of as amended. The 2007 Plan provides a variety of long-term equity
based incentives to officers, directors, employees and other persons proVldmg servIces to the Company and authonzes the Compensation Committee to grant options as well as other
fonns of equity based incentive compensation, such as restricted stock awards, stock appreciation rights, perfonnance units and supplemental cash payments. At June 30, 2009, there
were 159135 non-vested restricted stock awards outstanding. These awards vest 20% annually on the anniversary date of the grant over a five-year period. Unrecognized stock-based
expense related to non-vested stock awards was S2.1 million as of June 30, 2009. At such dste, the weighted average period over which this unrecognized expense was
expected to be recognized was 3.9 years.
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
prior stock option plan. '
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The fair of each stock option award is estimated o? .the date of using the Hull-White an enhanced trinomial·lattice-based model, which takes iato account certain
dynamic assumptions about interest rates, expected volatility, expected empl.oyee patterns, forfeitures and other factors. Expected volatility is based primarily on
historical volatility of the closing price of the Company's cOJl!lDOn stock. The nsk-free IDterest rate IS based on the U.s. Treasury yield curve in effect at the date of grant with a term
equal to the life of the option. The expected term of options granted is using the and represents the period of time that options granted are expected to be
outstanding and post-vesting employee behavior by group of employee. ForfeItures are estImated outsIde of the Hull-White model based on attrition studies performed annually. As
the Board has declared regular $0.06 quarterly dividends, these are considered in the option valuation. The weighted-average fair value of options granted during the three months
ended June 30, 2009 was $3.10 per share. The intrinsic value of outstanding options at lune 30, 2009, was $0. Outstanding stock options have a weighted average remaining contractual
term of 7.3 years, and future compensation expense associated with those options is approximately $1.8 million. The remaining expense is expected to be recognized over the weighted
average period of2.6 years. Options and exercisable were granted at s!ock option prices that were not less.than the fair market value of the coolmon stock on the date the
options were granted and no option has a term .ID excess of ten years .. Employee options vest ratably over a five-year penod
The following weighted-average assumptions were used to estimate the fair value of options granted during the periods:
Sis: Moaths EJIded
Emplqee Stock Pllrchll8e PIIIII
The Company has an employee stock purchase plan ("ESPP"). As of June 30, 2009, there were 145,005 ESPP Shares available for future issuance. The price at which ESPP Shares are
sold under the ESPP is 85% of the lower of the fair market value per share of common stock on the enrollment date or the purchase date. It is presently estimated that 26 812 shares will
be issued through the ESPP for 2009. The expenses associated with such share-based payments were $22;000 and $24,000 for the quarters endqd June 30, 2009 and June 30, 2008,
respectively, and $44,000 and $48,000 for the six months ended June 30, 2009 and lune 30, 2008, respectively. . .
13. Income Taxes
Income tax expense was as follows:
Six Montlls Eaded
June 30, 2009 June 30, 2008
.. .' ...h.... . (Dollars in thousands)
,.';:;? ';f' :;:;;.,:i.":,';:':; ,:;;: .,.·.c .... ;·;;:{.', .. ,,;':" "
Deferred income tax (benefit) (2,752) (1,855)
.• .;' ": '"'::; ..
:J,;';;Z{'r':;'j;· ... ';,.; ..;.,'.",' .•.. ,,;;.:: ·.".::;;: .. ':(iiIi: '_"
The Company's effective tax rate for the three months ended lune 30, 2009 and is below the statutory tax rate due to: (i) realization of New Markets Tax Credits, which have been
deployed at a subsidiary of the Bank, which were $624,000 and $593,000 for the SIX months ended June 30, 2009 and lune 30, 2008, respectively; (ii) tax exempt earnings, which principally
relate to income from bank owned life insuraace, and (iii) a change in apportionment due to an increase in income allocable to the State of Texas in 2009.
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At June 30, 2009 and December 31, 2008, the Company had accrued $348,000 related to unrecognized tax benefits. This amount is accrued in other liabilities in the consolidated b8tance
sbeet. '
Interest and penalties associated with the liability for unrecognized benefits is approximately $245,000 at June 30, 2009 and December 31, 2008, and is included in other liabilities in the
consolidated balance sheet. ,
14. Segment Information
Under SF AS No. 131, "Disclosures About Segments of an Enterprise and Related Information," the Company has three reportable segments: (i) a community banking subsidiary, (ii) a
custodial escrow and paying agent services subsidiary, and, (iii) a mortgage banking' subsidiary. The remaining subsidiaries are included in the "all others" category and consist
primarily of the parent company operations. The Company's segments are more fully described in Note 2 to the audited financial atatements in the Company's Fonn IO-K for the year
ended December 31, 2008.
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2184
't')):;!,; ..;,'.!,;: ;::::/,;,,;':')":'
Revenues from external customerS:

Noninterest income

Intersegment revenues
15. Fair Value of Financial Assets
Custodial and
Advisory
Se"lees
Mortgage All
Others Total
SF AS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a 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 shaH not be adjusted for transaction costs. An is a transaction to the market for a period prior to the measurement date to allow for
marketing activities that are usual and customary for transactions IDvolvlDg 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) knowledgeable, (iii) able to transact, and (iv) willing to transact
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2185
. SFAS 157 requires the use of valuation techniques that ,,:,ith market approach, the the cost approach. The market approach uses prices and
'other relevant information generated by market transactions IDvolvlDg Identical or comparable assets and habllitles. The'lDcome approach uses valuation techniques to convert future
amounts, such as cash flows or earnings, to a single on a discounted .basis. The C?st approach is on the that currently would be required to replace the
service capacity of an asset (replacement cost). Valuation techniques be consistently apphed. Inputs valuation techDlques refer to the assumptions that market participants
would use in pricing the asset or liability. Inputs may be observable, meaDlng those that the assumptions that market participants would use in pricing thlJ asset or liability
developed based on market data obtained fro,? sources, or th,ose the reporting entity's own assumptions about the assumptions lI!arket
participants would use in pricing the asset ,or developed based on the available ,ID circumstances. that regard, SF AS 157 establishes a fair value hierarchy
that gives the highest priority to quoted prices ID active markets for assets or lIablhtles and the lowest pnorlty to unobservable IDputS. The fair value hierarchy is as follows:
Levell:
Level 2:
Level 3:
Inputs to the valuation mlJlhodology are quoted prices, unadjusted, for identical assets or liabilities in active marklJts. A quoted price in an active market
provides the most reliable evidence of fair value and shall be use4 to measure fair value whenevlJr available.
Inputs to the include for simiiar assets or .in active markets; !nputs to the valuation methodology include
quoted prices for Identical or Similar assets or liabilities ID marklJls 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. .
Inputs to the valuation methodology are unobservable and significant to the fair value measurement. Level 3 assets and liabilities include financial
instruments whose value is determined using discounted cash flow methodologies, as well as instruments for which the determination of fair value requires
significant maoag_ent judgment or estimation.
A description of the valuation methodologies for measured at fair as .well as the g!neral c!assification of such instruments pursuant to the valuation
is set forth below. These valuation methodologies were apphed to all of the Company s financial assets carned at falf value or the lower of cost or fair value.
In general, fair value is based upon quoted prices, where available. If such quoted market p.rices not available, fair value is based upon internally developed models or
obtained from third parties that primarily use, as IDPUts, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at
fair value, or the lower of cost or fair value. These may A!ly valuation have been applied consistently over time. The
Company's valuation methodologies produce a value t,hat may not be of net value or reflective future fair values. While management believes
the Company's valuation methodologies are appropnate 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 off air value at the reporting date. the reported fair value amounts have not been comprehensively revalued
since the presentation dates, and therefore, estimates offalr value after the balance sheet date may differ slgDlficantly from the amounts presented herein.
Financial assets and financial liabilities measured at fair value on a recurring basis include the following:
Available for. sale securities. Securities available for sale are comprised of agency securities and nonagency securities (private label) collateralized mortgage obligations.
securities are reported at fair value using. Level I inputs. ManagelDlJDt believes Levell is appropriate for agency securities due to the relative availability of pricing
transparency for such securities in the marketplace. .
• Nonagency securities (private label) collateralized mortgage obligations are reported at fair value using Level 2 inputs. Manag_ent believes Level 2 is appropriate for these
securities because the Company obtains fair value measurements from four sources. Two are widely known pricing services including an independent pricing service that was
utilized by the FHLBank Topeka to determine the collateral value of such securities in the borrowings obtained by the Bank. The third source is an independent consultant that
performs fair market valuation for identified by managemlJDt as requiring additional in order to ascertain fair value in accordance with SF AS 157. Gllnetally, if
the pricing services' value of the secunty are reasonably comparable and appears reasonable given the characteristics of the underlying loan pool that determine the fair value
of the security, that price is ut?i:z:d as value: Management such. prices represent market data per se, and are based, in part, upon dealer
quotes. Generally, if thlJfC are dlspanties ID the between the the an unpaid principal balance of over $2 million, and there is
an unrealized loss of over $1 million, the Company consldlJrs whether the pnclDg service falf value estimate IS based on sufficient market' activity and the pll'rformance
characteristics of the loan pool underlying tile particular security and conclude whether the pricing service has provided an estimate that represents fair value in accordance
with SF AS 157.' 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 rese,arch of firms information yield, re!l8:ymlJDt, defaults, delinquency and other factors. Management is
comfortable with the data utihzed by the pnclDg service based on Its reVIew of documlJDtation and diSCUSSion With personnel from these entities, The last source is an internal
model which is used to validate the selection of the other three sources and is an income approach model. .
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2186
At December 31, 2008 the Company owned nonagency securities collateralized by payment-{)ption-adjustable-rate mortgages, which were reported at fair value using Level 3
. inputs. The fair value of payment-option-adjustable-rate mortgages were 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 used by the third party were reasonable, since the cash flow models were based on
assumptions about future events and future performance of the un?7rlymg collateral,. they were based on unobservable market data. Further, management believes the
valuation of payment-{)ption-adjustable-rate mortgage backed secunlles was less certam 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.
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 adjusllnents in certain 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 heldfor 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 ohservable 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 commillnents. Management makes
certain adjusllnents to the data inputs that it believes other market participants would consider in estimating the fair value of the Company's residential held for sale portfolio including:
delinquency, existence of government guarantees, seasoning, loan to ratios, FICO .scores, foreclos?re levels, loss severities, among other factors. During the first half of 2009,
interest rates and spreads on residential loans held for sale contracted, which favorably of residential loans held for sale; however, an increase in delinquencies
substantially offset the impact of interest rates and spreads. The Company recorded a recovery to Its preVIOusly established valuation allowance of $325,000 that increased the carrying
value ofresidenlialloans held for sale to reflect fair value. The remaining change in value from December 31, 2008, when the balance was $212,083,000, was due to repaymentsof$11.7
million and $524,000 transferred to real estate owned.
Mortgage servicing rights. Mortgage servicing rights are reported at 10'Yer of cost or value using Leyel3 inputs. Management engages an independent third party to perform a
valuation of its mortgage servicing rights periodically. Mortgage servlcmg nghts are valued m accordance With SF AS 140 using discounted cash flow modeling techniques that require
management to make estimates regarding future net servicing cash flows, taking into consideration and expected mortgage loan prepayment rates, discount rates, servicing costs,
and other economic factors. Certain adjusllnents to inputs are made to reflect the specific charactensllcs of the Company's portfolio. During the six months ended June 30, 2009, the
change in value of the asset versus December 3 ), 2008, was due to amortization.
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 volume of such sec.urities and, as. a result, the Company relies upon a valuation of these securities using a cash flow
forecast model that incorporates elements of market participants prepared by an mdependent 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.
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2187
Impaired loans. Certain impaired loans are reported at the fair value of the underlying collateral if management concludes repayment is expected solely ftom 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 quarter ended June 30, 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
col1atera1. Impaired loans with a carrying va1ue oU2LS million were reduced by specific valuation allowance allocations totaling $S.8 million to a total reported fair value oUIS.7 million
utilizing Level 3 valuation inputs. The provision for credit losses on impaired loans made during the quarter ended June 30, 2009 totaled $I.S million, and for the six months ended June
30, 2009 totaled $3.S million.
The following represents assets measured at fair value on a recurring basis as of June 30, 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):
Description
Quoted Prices In
Aetlve Markets for
Identical Assets
(Level t)
Investment securities available-for-sale . .
Significant Significant
Other Observable Other Unobservable
Inpnts Inpnts
(Levell) (Level 3)
(Dollars In thousands)
Total
Fair
Value
.. ....... $ 13,076 $ 25,281 '$ . "'$ 38,3S7'
The table below presents a reconciliation of the securities measured at fair value on a recurring· basis using significant unobservable inputs (Level 3) for the three and six months ended
June 30, 2009.
Investment securitIes
available-for sale
(Dollars In thousands)
Three Months Six Months·
;',;;; : '{
c:r.'i;::' •• ':li;,,},;;·;::)t?
Balance June 30, 2009 $ .. $ ______ .........
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2188
The following represents financial assets measured at fair value on a nonrecurring basis as of June 30; 2009 and December 31, 2008. The valuation methodology used to measure the fair
value of these assets is described earlier in the Note. .
Description
Nonfinancial assets measured on a nonrecurring basis are summarized below:
Quoted Prtees
inActive
Market.ror
Identleal Alleta
(Levell)
Quoted Prices Significant
in Active Other Significant
Total
Fair
Value
Markets ror Observable Unobservable Total
Identleal Aneta Inputa Inputs Fair
Description (Levell) . ..... (Levell) (Levell) Value
.... ,." ••. sse.,,,.,, .. ,.< ...•• ,,,,,,,, ta.,;,., ...a." ; ...•.. ... '''' .•• J ....... un .... ..•..... , .. 3 t ..•: ••.2 ...... .'" .......... ..009 ... · .... · ...· ....•...• .. ,::..• ... ... ............. '.:; .... ' ..... '*.':,. : ..• ,;'U, •••. , •••·.:.: •... : ••..• i:....• ·.;,...... •...•. ..•i,: •. · ...•. " ....,,::.,:, •... .. .. ::.f ••.••. .• ·;L.•..•..• '.·.1.·.5•.. .. • •.. ·.' .•. .•. i.:.. .... · •. ••'.·.!;. ..• :.:••. .. .. .• ...,:... ..,i;_.!: •• .• (.,.·.;; .. : .. ! .. : .• ... : ... : .. ... .• .•• .• .• ,·.:.· •. :.l., ..··:.;.:... ... ::..:.':.:,f.,;.·,'" .. ;:.. • ... .•; ••• ••. .• ..,·' ••. !.· .•. ,.·.·.;, .• .. '.",· .•.. ,'.1.. .. :·.i .• :;..· ..r .... '.: .... ' ..·:!' ... •• ,,,:;;,,,,,,::<'.'"'to'''''_''''';'''''''''' '.N" ''' . ...,,'W "''' ".""'" "t ..."., ' ..
... ' ,. --, •.. 1" i>:'" - -..<' M ". •• '_ .- .. r.
Foreclosed reai estate consista 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 acquire", establishing a new cost basis .. Fair value is generally determined
via appraisal. Costs after acqUisition are generally expensed. If the fair value of the asset declines, a write-clown is recorded through expense.
During tbe six months ended June 30, 2009 there were no transfers out of Level 3 financial assets.
SFAS 107 "Disclosures about Fair Value of Financial Instruments," requires disclosure.ofthe fair value of financial assets and financial liabilities, including those financial assets and
financial t'iabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis. The methodologies for estimating SFAS 107, "Disclosures about Fair
Value of Financial Instruments," requires disclosure of the fair value of fmancial 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. Tbe carrying amounts and estimated fair value of financial instruments are as follows:
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2189
Carrying
Amouat
Juue 30,1009 December 31,1008
Estimated Carry lug Estimated
Fair Value Amouut . Fair Value
(Dollars iF/thousands)

The following methods aad assumptions used by the Company in estimating the fair value of the financial instruments are described in the Compaay's Annual Report on Form 10-1(.
16. Commitments and Coutingeucies
Commitments
The Compaay is a party to credit-related finaaciai instruments with sheet risk the course of business to meet the financing needs of its customers. These financial.
instruments include commitments to extend credit and staadby letters of credIt. Suchconumtments lDvolve, to a varying degree, elements of credit and interest- rate risk in excess of the
amount recognized in the consolidated balance sheets.
A summary of the contractual amount ofsignificaat commitments follows:
The Compaay's exposure to credit loss, in the event of the ot.her party,.to off-balance financi.al with credit risk is represented by the contractual
amounts of those instruments. The Company uses the same CredIt pobcles lD maklDg commItments aad condItional obhgations as It does for on-balaace sheet instruments with credit
risk.
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2190
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 tht/ contract. Such
instruments generally have fixed expiration dates or other termination clauses and may 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. The Company evaluates each customer's creditworthiness on a case-by-case
basis, and the amount of collateral or other security obtained is based on management's credit evaluation of the customer. .
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 tu perform according to the terIns of the underlying contract with the third party. .
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 the Company's business.
The Company accrues liabilities when it is probable costs be .incurred can be estimated. Such accruals are based upon developments to date, the
Company's estimates of the outcome of these matters and Its expenencem contesting, btigating and settbng other matters. Because the outcome of most litigation matters is inherently
uncertain, the Company will accrue a loss for a pending Iitigati?n matter iftbe loss is prohable and can be reasonably. estimated. Based on evaluation of the Company's litigation matters
and discussions with external legal counsel, management believes that an adverse outcome on tbe matters noted ID the Company's Annual Report on Form 10-K, against which no
accrual for loss has been made at June 30, 2009, is ressonably possible but not probable, and that the outcome with respect to one or more of tbese matters, if adverse, is reasonably
likely to have a material adverse impact on the consolidated financial position, results of operations or cash flows of the Company.
The legal contingencies of the Company are more fully described in the Company's Fomt 100K for tbe year ended December 31, 2008 under Item 3. Legal Proceedings and in Note 21 to
the audited financial statements. During the six months ended June 30, 2009, there were no material changes to the information previously reported except as disclosed below and in Part
n, Item I,Legal Proceedings.
Unhed 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 First Matrix, along with two !omter of First Matrix, in Idaho State District Court alleging violations of state
securities laws, the Idaho Consumer Protection Act and fraud anslDg from tbe sale of an approxlDI8tely $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 1.2, 20?6, is. based on the plaintiffs' claims that First Matrix should have made certain disclosures
regarding the risk of the withdrawal ofa USDA govemment guarantee of the bond, whIch WIthdrawal subsequently occurred and the bond went into default. The Company and First
Matrix may seek indemnification for the claims made against them in this case from the underwriter or from other potentially responsible parties. While tbe defendants'liability, if any, to
the plaintiffs in this case is uncertain at this time, the Company believes that the defendants have meritorious defenses to the plaintiffs' claims.
United Western Bank. Ward Enterprises. LLC v. Daniel E .McCabe et. 01. including United Western Banlc. 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 institutional account at tbe 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 $L84 million of plaintiff's funds by the holder of the institutional account maintained at the Bank. This
litigation is presently stayed pending the outcome of related proceedings filed in the United States Bankruptcy Court for the Southern District of New York. While tbe defendants'
liability, if any, to the plaintiff in this case is uncertain at this time, the Company believes that the defendants have meritorious defenses to the plaintiff's claims. .
United Western Bank. Anita Hunter et. al. v. Citibank, N.A et. al. including Ullited 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 ("Exchange Funds")
entrusted to seven qualified intermediaries ("QI8") to facilitate their respective Internal Revenue Code Section 1 031 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 to their own use for personal gain. The
plaintiffs seek class certification for all similarly situated who lost Exchange they placed such funds using Qls: One of the Qls maintained accounts at the
Bank for the purpose of holding Exchange Funds. The plalRtiffs allege that the Bank knowlRgly BIded and abetted breschesof 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. While the Bank's liability, if any, to the
plaintiffs in this case is uncertain at this time, the Company believes that the Bank has meritorious defenses to the plaintiffs' claims. .
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United Western BlInk. Highpoint Vista, UC et. al. v. United Western Bank et. al. 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 $1 0 million
dollars aPinst the Bank for bresch of contract, breach of the covenant of good filith and fair dealing, breach of fiduciary duties and negligent misrepresentation. The plaintiffil 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 estate, thereby to plaintiffs. While the Bank's liability, if any, to the plaintiffs in this case is uncertain at this time, the
Company believes that the Bank has mentonous defeases to the plamtiffil claims.
CondngelJCies - GlIIIl'fIntees
The Company maintains a liability related to its legacy mortgage banking operstions at Matrix for estimated losses on mortgage loans expected to be repurchased or which
indemnification is expected to be provided. The Company regularly· evaluates the adequacy of thIS repurchase liability based on trends in repurehase and indemnification requests,
actual loss experience, and other releVant factors including economic conditions. Total loans repurchased during the six months ended Iune 30, 2009 and 2008 were $99,000 and
$394,000, respectively. Loans indemnified that remain outstanding at Iune 30,. 2009 $5.9 million, of which $2.1 million were guaranteed as to principal by FHA. Losses net of
recoveries charged against the liability for estimated losses on repurchase and mdemDlficallon were $0 and 5445,000 for the six months ended Iune 30, 2009 and 2008, respectively. At
Iune 30, 2009 and December 31, 2008, the liability for estimated losses on repurchase and indemnification was $1.1 million and 51.2 million, respectively, and was included in other
liabilities in the consolidated balance sheets.
In connection with the May 2006 sale of ADS School Services, LLC, the Company and Equi-Mor Holdings, Inc., a wholly owned subsidiary of the Company, guaranteed, for a five year
period, the repayment ofthe loans sold to the purchaser up to an aggregate creating a recourse obligation for the COlllpany. During the second quarter of 2009,
the Company incurred no losses against its guarantee. The balance of the estImated hablhty at Iune 30, 2009 and December 31, 2008, was $445,000, and is included in other liabilities in
the consolidated balance sheets.
17. Discontinued Operatloos- Sale ofUW Trust Assets
As announced on lune 29, 2009, the Company completed the sale of certain assets ofUW Trust Company (formerly 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 provic\ed for in the definitive purchase agreement
the transaction. The assets sold were associated with the custodial IRA and qualified employee benefit plan businesses ofUW 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 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. prime rate, currently 3.25%, with a floor and a cap of 2.25% and 4.25%,
respectively. Management engaged a third to assess the value of the note fi;om !he sale and that a discount of 4.2% was required to reflect
the filir value of the note. Accordingly, the gam on sale was reduced by $1.9 mtlbon, whIch WIll be amortized Into mcome as a YIeld adjustment on the note over its term. .
As a result of the sale, the Company recorded an after tax gain of $36.1 million for the quarter and six months ended Iune 30, 2009, which is included in discontinued
operations for the same periods. The operating results associated WIth the sale of UW Trust assets have been retrospectively presented as discontinued operations beginning January
·1, 2008. The operating results ofUW Trust previously included in the Company's custodial and advisory services segment, and now included in income .ftom discontinued operations,
net of income taxes are presented in the table below. .
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After the sale, UW Trust Company will retain and continue to operate its custodial escrow and paying agent lines of business.
Quarter Ended Six months Ended
June 30,1009 Juue 30,1008 Juue 30,1009 June 30,1008
Premises and equipment with a book value of $2,596,000 at December 31, 2008 was included in other assets and carried at·the lower of cost or fair value. These assets were sold to the
Buyers in connectiou with the sale ofUW Trust assets.
18. Impact ofReeenIly Issued AI:eouullng Stlindards
SFAS 160, "Noncontrolling Interest in Consolidated Financial Statements, an amendment oJ ARB Statement No. 51 ... SFAS 160 amends Accounting Research Bulletin ("ARB") No .
. 51, "Consolidated Financial Statements," to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a sUbsidiary.
SF AS 160 clarifies that a noncontrolling interest in a subsidiary, which is sometimes referred to as a minority il!terest, 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! SF AS 160 requires consolidated net income· to be reported at amounts that
include the amounts attributable to.both the parent and the noncontrolling 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 noncontrolling interest. SF AS 160 was effective for the Company on January 1, 2009 and the impact of this was not material
to the Company's financial statements.
SFASI41R, "Business Combination (Revised 2007) . .. SFAS 141R replaces SFAS 141, "Business Combinations," and applies to all transactions and other events in which one entity
obtains control over one or more other SFAS 141R; an control of an?ther entity, to recogni.ze the assets, liabilities and any
noncontrolling interest in the acquiree at faIr value as of the acquIsItiOn date. Contmgent 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 may be beyond a .. This fair value approach .repla,ces the cost-al\ocation process required
under SFAS 141, whereby the cost of an acquISItion was allocated to the mdlV1dual assets acqUired and habtllties assumed based on their estimated fair value. SFAS 141R 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 SF AS 141.
SF AS 141R also identifies related disclosure requirements for business combinations. This Statement is effective for business combinations closing on or after January 1, 2009 and did
not have a material impact on the Company.
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FSP SFAS 157-4 "Determining Ftlir Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased a"d Ide"tifyi"g Tra"sactio"s That Are Not
Orderly. " FSP SFAS 157-4 affirms 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 determining whether there has been a significant decrease in market activity for an asset when the market for that asset is not active. FSP
SFAS 157-4 requires an entity to base its conclusion about whethera transaction was not orderly on the weight of the evidence. FSP SFAS 157-4 also amended SFAS 157, "Fair Value
Measureme"ts," to expand certain disclosure requirements. The Company adopted the provisions ofFSP SFAS 157-4 as of April I, 2009. 11Ie adoption ofFSP SFAS 157-4 did not
significantly impact the Company's financial statements. .
FSP SFAS 115-2 and SFAS 124-2, "Recog"itio" and Presentatio" of Other-Than-Temporary Impairments." FSPSFAS 115-2 and SFAS 124-2 (i) change existing guidance for
determining whether an impairment is other-than- temporary to debt securities and (ii) replace 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 FSP SF AS 115-2 and SF AS 124-2, 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 required to be reflected in earnings as realized losses to the extent the impainnent is related to credit losses. The amount
.of the impairment related to other factors is recognized in other comprehensive income. Through the period ended March 31, 2009, the Company recognized cumulative other-tban-
temporary impainnent ("Om") charges of $4.1 million for two securities. The Company adopted the FSP effective April I, 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
$387000, 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.· .
FSP SFAS 107-1 and APB 28-1, "Interim Disclosures about Fair Value of Financial Instrumenls. "FSP SF AS 107-1 and APB 28-1 amend SF AS 107, "Disclosures about Fair Value of
Financial Instruments, " to require an entity to provide disclosures about fair value of financial instruments in interim financial infonnation and amends Accounting Principles Board
(APB) Opinion No. 28, "I"terim Fi"aneia/Reportlng, "to require those disclosures in summarized financial information at interim reporting periods. Under FSP SFAS 107-1 andAPB
28-1, a publicly traded company shall include disclosures. about the fair of its it issues summarized financial information for interim reporting
periods. In addition, entities must disclose, in the body. or the of finanCial mformation for reporting periods and in its financial statements
for annual reporting periods, the fair value of all financtal mstruments for whlcq It IS practicable to estimate that value, whether recognized or not recognized in the consolidated balance
sheet, as required by SF AS 107. The adoption of this FSP at June 30, 2009 did not have a material impact on the results of operations or financial position of the Company as it only
required disclosures which are included in Note 15 to the consolidated financial statements.
FSP SFAS 141R-I, "Accounting for Assets Acquired and Liabilities Assumed in a Business Combi"atlo" ThaI Arisefrom Conti"gencies." FSP SFAS 141R-llimends the in
SFAS 141R to require that assets acquired and liabilities assumed in a business combination that arise from contingencies 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 SFAS 5, "Accounting for
Contingencies, "and FASB Inietpretation (FIN) No. 14, "Reasona.ble of the Amount ofa SFAS removes subsequent accounting guidance for assets and
liabilities arising from contingencies ffillil SF AS 141 R and requires entitles to develop a systematIc and rational baSIS for subsequently measuring and accounting for assets and
liabilities arising from contingencies. FSP SF AS 141 R-I eliminates the requirementto disclose an estimate of the range of outcomes of recognized contingencies atthe acquisition date.
For unrecognized contingencies, entities are required to include only the disclosures required by SF AS 5. FSP SF AS 141 R-I also requires that contingeni consideration arrangements of
an acquiree assumed .by the acquirer in a business combination be treated as contingent consideration of the acquirer and should be initially and subsequently measured at fair value in
accordance with SFAS 141R. FSP SFAS 141R-1 is effective for assets or liabilities arising from contingencies the Company acquires in business combinations occurring after January I,
2009.
SFAS 165 Events." SF AS 165 provides guidance on assessment of subsequent events. SF AS 165 does not significantly change past practice because the
guidance is similar to other existing authoritative SFAS clanfies that must evaluate,. as of each reporting period, events or transactions that occur after the
balance sheet date through the date that the financial statements are Issued SFAS 165 requtres management to disclose the date through which subsequent events have beim evaluated
and whether that is the date the financial statements were issued. SFAS 165 was effective for interim periods ending after June 15,2009. The adoption of SFAS 165 did not have a
significant impact on the Company's financial statements.
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SF AS 166 "Accountingfor Transfers of Financial Assets. an amendment ofFASB Statement 140. "SF AS 166 removes the concept ofa qualifYing special-pwpoSe entity from SF AS 140
and removes the exception from applying FASB Interpretation No. 46 (revised December 2003), "Consolidation of Variable Interest Entities." to qualifYing special-purpose
entities. SF AS 166 clarifies the objective of paragraph 9 of SF AS 140 is to detennine whether a transferor and all of the entities included in the transferor's financial statements being
presented have surrendered control over transferred financial assets. SF AS 166 defines the term psrticipating interest to establish specific conditions for reporting a transfer of a
portion of a financial asset as a sale. Further, SF AS 166 eliminates the concept of guaranteed mortgage securitizations and enhances disclosure requirements. SF AS 166 will be
effective 1anuary 1,2010. Management has not completed its evaluation of this standard to determine ifit will have a significant impact on the Company's financial statements.
SFAS 167, "Amendments to FASB Interpretation No. 46(R}." SFAS 167 amends FIN 46 (Revised December 2003), "Consolidation of Variable Interest entities." to change how a
company determines when an entity that is insufficiently capitalized or not through voting similar rights) should be consolidated. The detennination of whether a
company is required to consolidate an entity is based on, among other th!ngs, .purpose and deSIgn and a company's ability to direct the activities of the entity that most
significantly impact the entity's economic performance. SFAS 167 additional 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. SFAS 167 will be effective 1anuary 1,2010, and is notexplcled to
have a significant impact on the Company's financial
SFAS 168, "The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles. a Replacement of FASB Statement No. 162." SFAS 168
replaces SF AS 162, "The Hierarchy of Generally Accepted Accounting Principles" and establishes the F ASB Accounting Standards Codification (the "Codification") as the source of
authoritative accounting principles recognized by the F ASB to be. applied by in the preparation of financial statements in conformity with generally accepted
accounting principles. Rules and interpretive releases of the SEC under authonty of federal secunties laws are also sources of authoritative guidance for SEC registrants. All guidance
contained in the Codification carries an equal level of authority. All non-grandfathered, non-SEC accounting literature not included in the Codification is superseded and deemed non-
authoritative. SF AS 168 will be effective for the Company's financial statements for periods ending after September 1 S, 2009. SF AS 168 is not expected have a significant impact on the
Company's financial statements. . .
Item 1. Management's Discussion and ·Analysis of Financial Condition and Results of Operations
This discUssion and analysis of United Western Bancorp. Inc.:V financial condition and results of operations should be read in conjunction with the consolidated financial
statements and notes thereto appearing elsewhere in Ihis report. The words "us." the "Company" or similar terms refer to United Western Bancorp.lnc. and its wholly owned
subsidiaries unless we indicate otherwise. The "Bank" refers to United Western Bank. . .
".
FOl'Wllrd-LoolriIIg Stmemllllts
This Quarterly Report on Form 1O-Q contains "forward-looking statements" that are made pursuant to the safe harbor provisions of the Private Securities Litigntion Reform Act nf 1995.
These forward-looking statements are subject to significant riskS and unc:ertainties. Forward-looking, s!Btements 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,'' "expeets," "anticipates," "predicts," "believes," "estimates," "potential," "projects," "goal," "intends," "should" or "continue" or the negative of any such
terms or other variations thereon or comparable terminology. However, a statement may still be forward IQO\dng even if it does not contain one of these tenDS. As you consider forward-
looking statements, you should understand that these statements are not guarantees of future performance or results. They involve risks, uncertainties and assumptions that could
cause actual perfonnance or resulta 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, and conditions specifically related to the financial and credit markets, 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 "Item IA. Risk Factors" of this Fonn lO-Q, in "Risk Factors" section of the
Company's Annual Report on Form lOoK for the year December 31, 2008.and ID the reports and filings with the Securities and Exchange Commission.
The Company cautions investors not to place undue rehance on the forward-looking statements contalUed ID thIS Quarterly Report.
Any statements made by Company speak of the date on which the statements 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 IU thIS Quarterly Report after the date on whIch they are made to reflect subsequent events or circumstances, except as
required by law.
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o.tl'1liew
Net income for the quarter ended lune 30, 2009 was $4.0 million, or $.55 per diluted share, compared with $3.3 million, or $.45 per diluted share, for the first of 2009. Net income for'
the second quarter was impacted by several significant items including: the gain on sale of UW Trust assets of $36.1 million, net of tax, and this amount is included in the results of
discontinued operations for the quarter. The loss on sale of $29.2 million, net of tax, from the sale of mortgage-backed securities owned. During the second quarter of 2009, we sold
l000A. of our mortgage-backed securities collateraliZed by option adjustsble rate residential loans with an unpaid principal balance of $47.3 million. Each of the five securities was rated
AA by nationally recogniZed rating agencies ilt acquisition. However, in the period from April2Q08 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 capitsl 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. Other items impacting the reSults for the
second quarter of 2009 included a loss on tbe disposition of two legacy assets owned by a non-core subsidinry of $1.8 million, a $672,000 loss at the UWBK Colorado Fund, incurred on
a loan related to a loan that paid off in full at the Bank, a 51.1 million special assessment from the FDIC, and higher provision for credit losses.
For the quarter ended June 30, 2009, we incurred a net loss from continuing operations 0($33.7 million, or 54.70 per sbare. For tbe quarter ended lune 30, 2008, the Company earned $3.0
million from continuing operations, or $.41 per diluted share. The items discussed above, as well as the continuing impact of the recession, caused the decline in operating results.
Net interest income before provision fOf credit losses by $1.5 million,. or 8%, from the second quarter of 2008 to the second quarter of 2009 as a result of higher levels of
liquidity that we maintsined on our balance sheet. We continue to market to our customer base; however, in the current environment we are cautious in our deployment oftbat
liquidity and believe it is prudent to maintain higher than normal levels of bquldlty on the balance sheet. Between the quarter ended June 30, 2009, and the. quarter ended June 30, 2008,
we grew average interest bearing liabilities. by $252 million, while $130 of that is reflected an increase !n average interest-eaming deposits, principally Fed
Funds sold and balances due from the Federal Reserve and FHLBank, whIch YIelded 16 basIS POints. As a result, net Interest m&rg1D decreased 60 basis points to 3.32% for the second
quarter 0(2009, compared to 3.92% for the second quarter of2008. .
Totsl assets at June 30, 2009 were $2.42 billion, which represents an increase 0($163 million from December 31, 2008. The increase in asseta was the result of our successful marketing of
deposits, including custodial escrow balances, which grew $147 Of this in deposits, $101 million was in community bank deposits, with the remainder in jnstitutional and
wholesale deposits growth. At June 30, 2009, cash was $289 nuillon, a $266 nuillon IDcrease over December 31, 2008 when cash balances were $23 million. Totslloans, before the
allowance for credit losses, increased $4.6 million and this includes the $44 million note, net of discount that we received in connection with the sale ofUW Trust assets. The balance
sheet strategy that we implemented in 2008 .included a reduction in loan growth relative. to earlier periods, a reduction in land lending and a reduction in the extension of new
construction coinmitments. Total shareholders' equity increased by $27.7 million, to $129.7 million at June 30, 2009, compared to $101.9 million at December 31, 2008, due to net income
and a $20 million increase in the accumulated other comprehensive loss as a result of the sale of the mortgage-backed securities discussed above. Our.1everage ratio increased to 5.35%
atIune 30, 2009 compared to 4.5 I % at December 31, 2008, and our book value share increased to $17.66 at June 30, 2009, from $14.06, at December 31, 2008. .
Nonperforming loans increased in the first halfof2009 and totsl nonperforming held for investment loans reached $28.4 million at June 30, 2009. Totsl nonperforming assets were $42.7
million aHune 30, 2009, or 1.76% of tots! assets, compared to $26.3 million, 1.17%, assets, at December 31, 2008. AUune 30, 2009, nonperforming community bank loans held
for investment were $24.6 million or 2.26% of the community bank portfolio vs. $4.6 puillon or .45% at December 31, 2008. The increase was principally caused by the economic
conditions faced by our customers. Nonperforming residential loans increased from year end, and were $12.7 million at June 30, 2009, compared to $9.7 million at December 31, 2008.
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A discussion of the Company's results of continuing operations is presented below. Certain rec\SSSifications have been made to make prior periods comparable. The financial
statement information for the quarter ended June 30, 2008, and six months ended June 30, 2008 reflect the operating results associated with the assets sold by UW Trust Company, as
discontinued operations.
Recent MtlI'ket Developments
The economy is experiencing a significant recession along with high unemployment. Declines in the housing market due to falling home prices and increased foreclosures and
unemployment have resulted in substantial declines in mortgage-relatedasset values, which have had a dramatic negative impact on govemment-sponsored entities and major
. commercial and investment banks.
On February 17, 2009, President Obama signed the American Recovery and Act of 2009 into law, which, among other things, amends and replaces Section III of EESA
which formed the basis ofa number of the executive compensation restriction limits imposed by EESA. In the event we participate in the EESA, particularly the CPP in the future there
will likely be changes in our operations some of which may have adverse consequences to our ability to execute on our strategy. "
The FDIC adopted a revised deposit insurance 27, deposit insurance premiums. On May 22, 2009, the FDIC also
implemented a five basis point speCIal assessment of each IDsured depOSItory IDslltullon s assets .Tler I as of June 30, 2009, but no more than 10 basis points times the
institution's assessment base for the second quarter of 2009, to be collected on September 30, 2009. AddItIonal speCIal assessments may be imposed by the FDIC for future periods.
We participate in the FDIC's Temporary Guarantee Program, or TLGP, for transaction accounts. Banks thl!ot participate in the TLGP's noninterest-
bearing transaction account guarantee WIll pay the FDIC. an assessment of ·10 baSIS POIDts .the amounts ID such accounts above amounts covered by FDIC deposit
insurance. To the extent that TLGP a.re I.nsufficlent to cover any or arlslDg from the TLGP program, the FDIC IS authorized to impose an emergency
special assessment on all FDIC-IDsured depOSItory IDstltulions. The FDIC has authority to Impose charges for the TLGP program upon depository institution holding companies, as
well. These changes, along with the full utilization of our FDIC insurance assessment credit in early 2009, will cause the premiums and TLGP assessments charged by the FDIC to
increase. These actions could significantly increase our non.interest expense in the of 2009 and for the foreseeable future. For the quarter ended June 30, 2009 our special
assessment was SI.I million, and for the first half of 2009 we mcurred FDIC costs of $2.6 mIllion, compared to costs of $492,000 for the first six months of 2008.
The Helping Families Save Their Homes Act of 2009 was signed into law by Ohama on 2009. The law the exp!ration date for the temporary increase in deposit
insurance 0($250,000 from December 3.1, 2009 to December 31, also ellmmates the provIsIon 10 the Emergency EconomIC Stablbzation Act of 2008 that prevented the FDIC from
considering this temporary increase in coverage for purposes of sellmg IDsurance assessments.
Compflrisfln 01 Results olOperatlolfBlor the (lUllrters Ended June 30, 2009 and June 30, 2008
InCome from continuing operadons. For the quarter end«:d June .30,2009, we incurred a loss of $33.7 million, or $4.71 per share, from continuing operations, as compared to
income from continuing operations of$3.0 million, or $.41 per baSIC and dduted share, for the quarter ended June 30, 2008. . .
Net Interest Iacome. The following table sets forth, for the periods and as of the dates indicated, information regarding our average balances of assets and liabilities as well as the
dollar amounts of interest income from interest-eaming assets and interest expense on interest-bearing liabilities and the resultant yields or costs. Ratio, yield and information is
based on average daily balances where available; otherwise, average monthly balances have been used. Nonperforming loans are included in the calculation of average balances for
loans for the periods indicated. .
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Average
Balanee
2009
Interest
For the Quarter Ended Jnne 30,
1008
Average --Al'v:e:r:ag::e:-----..:.::.::::....---;....-:A-v-er-a-ge--
. Rate Balanee Interest Rate
(Dollars In thousands)
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. VD1,,_ tuUI Riltll A""lysis Df NIt IntBIISt /netlmll
The following table presents the extent to which changes in volume and interest rates of interest-earoing assets and interest-bearing liabilities have affected our interest income and
interest expense during the periods indicated. is provided i? each with respect to.: (i) changes to changes in volume (changes in volume multiplied by
prior period rate), (ii) changes attributable to changes m rates (changes In multlpbed by volume) and (III) changes attributable to a combination of changes in rate and
volume (change in rates multiplied by the changes in volume). Changes attrIbutable to tbe combmed Impact ofvolume and rate have been allocated proportionately to the changes due
to volume and the changes due to rate. .
Volume
Quarter Ended June 38,
2009 VI. 2008
Inerease (Deerease)
One to Change In
Rate Total
As detailed in the foregoing tables, net interest income before provision for cre<;lit losses decreased $1.5 million, or 8%, to $IS.4 million for the quarter ended June 30 2009 as compared
to $19.9 million for the quarter ended June 30, interest margin 60 points to the quarter ended 30, from 3.92% for the June 30,
200S. The tables indicate the decrease in net mterest mcome before provIsIon for credIt losses was pnnclpally the result of an IUcrease m on-balance sheet liquidity invested in lower
yielding short-term deposits.
Interest income declined $1.5 million to $26.0 million for the quarter ended June 30, 2009, as compared to $27.5 million for the quarter ended June 30, 200S. Average community bank loans
increased $272 million to $1.132 billion for the quarter ended June 3D, 2009, compared to $860 million for the quarter ended June 30, 200S. The yield on those assets declined to 5.42% for
. the second quarter of 2009, as compared to 6.35% for the second quarter of 200S. The decline in the yield on community bank loans is consistent with the decline in the prime rate of
interest, to which many of our community bank loans are indexed. At June 3D, 2008, the prime rate was 5.00% compared to 3.25% at June 3D, 2009.
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During the same second quarter periods, the average of wholesale assets declined by S212.million.to' $91S million ,for the qUarter ended June 30, 2009, as compared to $1.13
billion for the quarter ended June 30, 2008. The dechne m the o.f assets IS consl.stent WIth management s to reduce assets. The reduction is principally
comprised of repayments from borrowers. The assets, which m companson to commuDlty bank loans have a negative Impact on our net mterest margin, did perform relatively
well in the second quarter of 2009. The yield on wholesale assets declined a modest 19 basis points between the periods, significantly less than the 93 basis point decline in the
community banking assets. The relatively modest decline in the wholesale assets is attributed to the annual reset schedule of wholesale loans, periodic floors, and the fact that
many ofthe mortgage.,backed securities have not yet reached their Inll1al reset date.
Also during the second quarter periods, the average balance of interest-eaming deposits and FHLBank stock increased to $172.7 million for the quarter ended June 30 2009 compared to
$S4.8 million for the quarter ended June 30, 2008. The yield on these assets declined to 36 basis points for'the quarter ended June 30, 2009 compared to 2.97% for the ended June
30, 2008. The growth in the assets was principally caused by our successful deposit marketing efforts; however, we have been cautious in the deployment of these assets, which has
caused some erosion of our net interest margin. -
Overall, the cost ofliabilities declined 21 basis points in the comparable quarters to I.S0% for the quarter ended June 30, 2009, versus 1.71% for the quarter ended June 30, 2008. The
average balance of interest-bearing liabilities increased by $2S2 million, principally in money market and NOW accounts, which increased $281 million between the periods. The overall
growth in interest-bearing liabilities was related to our successful deposit marketing efforts. In total, the cost ofintere.t-bearing liabilities declined $13,000 between the periods.
The cost of wholesale liabilities increased in the periods. FHLBank borrowings increased to 4.32% for the quarter ended June 30,2009 compared to 3.29% for the quarter ended June 30
2008. The increase in the cost of these borrowings is attributable to lower average balances; d?ring the. first half of 2008 half the average balance was comprised of short-tern:
borrowings that cost approximately 2.50%. During the first half of 2009, the average balance IS compnsed of longer-term borrowings that were acquired in November 2006, on
average.' There are $36 million of these borrowings, with a cost of S.14%. Included in the repurchase agreements are $7S million of wholesale agreements with a cost of 4.79% at June 30
2009 compared to a costof3J6% at June 30, 2008. These agreements mature beginning in September 2011. ' '
Provision for Credit LOsses. The provision for credit losaes was $6.3 million for the quarter ended June 30, 2009, compared to $2.1 million for the qUarter ended Iune 30, 2008. The
provision for credit losses in the aecond quarter of 2009 was the result of the current economic environment that we have experienced in Colorado with regard to our comniunity bank
loans and nationa1lywith regard to our residential loans. Loan was modest in second quarter, at of $44 million was the note receivable from the UW
Trust asset sale. During the second quarter of 2009, based our the commuDlty we consIdered .It to increase the allowance, including the loss
factors we apply to construction and development loans. ThIs resulted 10 10cremental $1.1 mtlhon of proVISIon expense. We Identified specific impairments on certain loans, which
'resulted in $1.5 million of provision expense and increased the loss factors we apply to residential wholesale loans, which resulted in approximately $208,000 of additional provision
. expense. The balance of the provision credit losses for second. of 2009 of approximately $3.S million was incurred to reflect current economic conditions principally
associated with construction and commercial real estate CredIts and decltDlng collateral values.
The provision for credit losses for the second quarter of 2008 reflected the growth of nearly $113.8 million of community bank loans offset by rePByments of residential mortgage loans
in'the period and certain improvements in individual loan grades. For a discussion of the Company's allowance for credit loss methodology see "Significant Accounting Estimates-
Allowance for Credit Losses," in Note I to our financial statements and; as it relates to nonperforming assets, see "Asset Quality." .
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Noninterest Income. An analysis of the components of noninterest income is presented in the table below:
Quarter Ended June 30,
2009 2008
(Dollars in thousands)
Dollar
Change
Percent
Change
Custodial, Administrative and Escrow Services. Service fees decreased $78,000, or 31%, for the ended June 30, 2009, as compared to $249,000 for the quarter ended
June 30 2008. In the fourth quarter of 2007, management elected to restructure our relatIOnship With one hfe settlement agent for special asset acquisitions and administration and
termina;e certain elements of business with respect to this large life settlement agent acc?unt. As a of this decisi?n, there has been a corresponding decline in revenues relating
to the escrow administration business. On June 27, 2009, UW Trust transferred substantially all of Its contractual relationships for custodial and administrative services pertaining to
individual retirement accounts and other tax qualified in an for value to Equ!ty Trust Company pursuant to <1 purchase and sale agreement (the "PSA"). The
PSA provides that, until June 27, 2014, UW Trust may n?t, With exceptions: (I) as a or 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 admlRlstrator for certain tax qualified retirement plans. Management of
UW Trust is in the process of implementing its revised business plan in light of these restrictions and intends to focus the majority of its business on providing administrative and
escrow services prospectively.
Loan Administration. Loan administration income service fees earned '!r?m loans for various investors, which are based on a contractual percentage of the
outstanding principal balance plus late fees and other ancillary. charges. fees $164,000, or 14%, to $1.0 million for the quarter ended June 30, 2009, as
compared to $1.2 million for the quarter ended June 30, 2008. ThiS decrease IS consistent With the dechne In our mortgage loan servicing portfolio. Our mortgage loan servicing portfolio
decreased to an average balance of $847 million for the quarter ended June 30, 2009, as compared to an, ave,?ge balance of $991 million for the ql.larter ended June 30, 2008. Our average
service fee rate (including all ancillary income) of 0.44% for the second quarter of 2009 was one baSIS pomt lower than the 0.45% for the second quarter of 2008. We anticipate loan
administration fees 1"ilI continue to decrease as our servicing portfolio decreases through normal amortization and prepayments.
Gain on Sale of Loans Held for Sale. Gain on sale of loans held for sale was $331,000 for the quarter ended June 30, 2009, as compared to $142,000 for the quarter ended June 30, 2008.
During the second quarter of 2009, the Bank sold $5.7 million of SBA-originated loans. The loan sales were part of our management of industry concentrations, interest rate risk, and
regular sales of the guaranteed portion of SBA-originated loans. For the quarter ended June 30, the company sold $2.7 million of SBA-originated loans, which generated gains of
$142,000. We expect such gains may fluctuate from quarter to quarter ?n a vanety of factors, such as the current interest rate environment, the supply and mix of
loans available in the market, the particular loan portfohos we elect to sell, and market conditions.
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Loss on Sale of AvaUable for Sale Investment Securities. As previously announced on July I, 2009, we sold 100"A. of our mortgage-backed securities Collateralized by option adjustable
rate residential loans with an unpaid principal balance of $47.3 million. Each of the five secilrities sold was rated AA by nationally recognized rating agencies at the time of
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 IQwer tranche securities in relatioll 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, mansgement elected to sell the securities,
which provided regulatory capital relief to the Bank in spite of the loss incurred. . . .
Other-Thea-Temporary Impairment ("orI1"). In connection with the Company's of FSP FAS 115-2 in the second quarter of 2009, the Company identified two of its non-
agency mortgage backed securities that indicated modeled brea.o .. These breaks In were under the new guidance and management concluded 0111 was
appropriate. Under the new FSP F AS 115-2, the Company IS requIred to mdlcate the total declme m faIr value, which IS represented by the total 0111 losses, subtract the portion that is
related to factors other than the credit loss, which is represented as the portion of loss recogaized in other comprehensive income (before taxes) and reflect the net impairment losses
recognized in eamings. The net impairment in represents th.e credit loss mariagement identified in securities based on cash flow modelillg.
Management believes that in the current eConomIc condItiOns, that It IS reasonably pOSSIble the Company wlllmcur future OTII charges on Its non-agency mortgage backed securities.
Other InCome. Other income was $642,000 for the second quarter of 2009 and principally included income earned on bank-owned life insurance 0($236,000, service charges of $129,000
and other miscellaneous items that totaled $277,000. This compares to the second quarter of 2008 when other income was $629,000 and included income earned on bank owned life
insurance of $239,000, prepayment penalties on loans and other loan fees not recognized as part of the yield on loans of $113,000, service charges of $77,000 and other miscellaneous .
items that totaled $200,000.
Nonlntenst Expense. Noninterest expense increased $4.1 million, or 26%, to $19.8 million for the quarter ended June 30, 2009, as compared to $15.7 million for the quarter ended June 30,
2008. The following table details the components of noninterest expense for the periods indicated: .
Quarter Ended June 38,
1089 1808 Donar Chaage Pereent Chaltge
(Dollars In thousands)
Other generalandadministrative . . ,2,118 ·2,070 . ... ... ··98%
' .. ,;,:iT i'.:··.·i
Compensation and employee benefits expense increased $427,000 to $6.6 million for the quarter June 30, 2009, as to $6.1 million for the quarter ended June 30, 2008 . .At
June 30 2009 we had 230 employees compared to 229 employees at June 30, 2008, as we had preVIOusly staffed the ntaJonty of employees for the Longmont, Hampden and Centenninl
principal cause of the increase between the periods was higher medical costs and an increase in compensation related to deferred direct loan origination
costs. Between 2008 and 2009,1oan growth declined ilnd, as such, there was compensation deferred as part of the cost to originate loans. Included in compensation and employee
benefits were costs of $337,000 and $294,000 for our stock-based compensatIon plans for the quarter ended June 30, 2009 . and 2008, respectively. The increase in stock-based
compensation expense is reflective of the additional employees hired to implement our business strategy.
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Subaccounting fees, which represent fees paid to second parties to service depository accounts on our behalf, are incurred at the Bank in respect of certain custodial 'and institutional
deposits. Such fees declined $502,000, or II %, to $4.0 million for the quarter ended June 30, 2009, compared to 54.5 million for ihe quarter ended June 30, 2008. This decrease was caused
by lower short-term interest rates. Subaccounting fees are generally tied to the Federal Open Market Committee target rate for overnight deposits. The average target rate for the second
quarter of 2009 was .25%, compared to 2.1 for the second quaT!m: of 2008. cost of fees d.id not fall in direct relation the change in the target rate for overnight
deposits as many of the agreements are subject to a floor rate that IS ID effect wlth current rates. OUTIng the penod, the average balances subject to subaccounting fees decreased $36.4
million for the quarter ended June 30, 2009, to $1.08 billion from S 1.12 billion for the quarter ended June 30, 2008.. ,
Amortization of mortgage servicing rights decreased $85,000, or 13%, to $587,000 for the quarter ended June 30, 2009, as compared to $672,000 for the quarter ended June 30, 2008.
Amortization of mortgage servicing rights has been declining consistently with the decline in our mortgage servicing portfolio. On a quarterly basis, the fluctuation is also a function of
the level ofrepayments of the remaining portfolio. The average balance in our mortgage servicing rights portfolio decreased to $847 million at June 30, 2009, as compared to $991 million'
at June 30, 2008. Prepayment speeds on our servicing portfolio were 17.9% for the quarter ended June 30, 2009, as compared to 16.2% for the quarter ended June 30, 2008.
The lower of cost or fair value on loans held for sale resulted in a charge of$252,OOO for the quarter ended June 30, 2009, compared to a charge oUI 54,000 for the quarter ended June 30,
2008. In the quarter ended June 30, 2009, the overall discount rate to which held for sale loan cash flows are measured decreased, which is favorable to the valuation of such
assets. Also, favorably impacting the results for the quarter, were the $7.2 million of repayments on the residential held for sale portfolio. However, overall delinquencies in the held for
sale residential portfolio increased, which offset the impact of a lower discount rate and repayments. For the quarter ended June 30, 2008, the lower of cost or fair value charge of
$154,000 was the result of deteriorating conditions in the marketplace for held for sale assets.
Occupancy and equipment expense increased $264,000, or 47%, to. $823,000 for. the quarter ended June 30, 2009, as compared to $559,000 for the quarter ended June 30, 2008. We
recognized $289,000 and $294,000 of amortization of def!rred galD as a of occupancy the quarter ended June 30, 2009 and 2008, respectively. This amount
represents a reduction in our occupancy expense for the penod from the ofthe deferred galD resultlDg from the sale-leaseback of the UnitedWestern Financial Center,wbich
is being amortized into income over tbe ten-year term ,of the lease. The IDcrease 1D occupancy expense was related to the opening of the three branch locations between the periods -
Longmont, Hampden, and Centennial.
Deposit insurance increased' $1.6 million, to $1.9 million for the quarter ended June 30, 2009, compared to $260,000 for the second quarter of 2008. The increases in deposits 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. The FDIC finalized a rule in December 2008 that raised the then current assessment rates uniformly by 12 to 14 basis points. In February 2009, the FDIC issued final rules to
amend the deposit insurance fund restoration plan, change the risk-based,assessment system and set assessment rates for Risk Category I institutions beginning in the second quarter
of 2009. The new initial base assessment rate ranged from 12 to 16 basis points, on an annualized basis, and from 7 to 24 basis points aftetthe effect of potential base-rate adjustments,
depending upon various factors. The increase was also partly the additional 10 basis point incurred on covered transaction accounts exceeding $250,000 under
the Temporary Liquidity Guaranty Program, in which the Bank participates. 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 offactors which are beyond the Company's control.
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 approximately $2.3 million to $5.7 million for the quarter ended June 30, 2009, as compared to $3.4 million for the quarter ended June 30, 2008.
Professional fees increased $304,000 related to routine legal matters, loan collection matters and consulting fees incurred to model cash flows ofvarious non-agency mortgage-backed
securities. Other general and administrative expenses increased $2.1 million between the second quarter of 2009 and 2008. This was principally due to a $1.8 million loss on the
disposition of legacy assets owned by a non-core subsidiary and a $672,000 loss at the UWBK Colorado Fund, incurred on a loan related to a loan that paid off in full at the Bank.
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2203
Income Tues. The income tax benefit from continuing operations was $19.3 million for the quarter ended June 30. 2009, as compared to income tax provision of $1.3 million for the
quarter ended June 3D, 200S. The Company's effective tax rate for the three months ended June 3D, 2009 and 200S is below the statutory tax rate due to: (i) realization of New Markets Tax
Credits which have been deployed at a subsidiary of the Bank, which were $327,000 and $297,000 for the three months ended June 30, 2009 and June 3D, 2OOS, respectively; (ii) tax .
exemp; earnings, which principally relate to income from bank owned life insurance, and (iii) a c h a n ~ e in apportionment due to an increase in income allocable to the State. of Texas in
2009.
COllfplll'ison of Result. ofOpertllionBfor the Six Month. Eruled June 3D, 21J1J9 find June 3D, 200S
(Loss) income from continuing operatio .... For the six months ended June 3D, 2009, we incurred a loss of $30.3 million, or $4.23 per share, as compared to income from continuing
operatioos' of $6.3 million, or $.S6 per basic and diluted share, for the six months ended lune 3D, 200S. In the first six months of 2009, as compared to the first six months of 200S, we
incurred a loss from sale of 100% of its option ann adjustable rate mortgage-baclted securities and increased the provision for credit losses to $IO.S million for the first half of 2009 as
compared to $4.0 million for the first half of200S.
Net Interest Income. The following table sets forth, for the periods and as of the dstes indicated, information regarding our average balances of assets and liabilities, as wel\ as the
dollar amounts of interest income from interest-eaming assets and interest expense on interest-bearing liabilities and the resultant yields or costs. Ratio, yield and rate information is
based on average daily halances where available; otherwise, average monthly balances have been used. Nonperforming loans are included in the calculation of average balances for
loans for the periods indicated.
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2204
Average
BalaDce
2009
IDterest
-47 -
2205
Six MODths EDded JUDe 30,
Average Average
Rate Balanee
(Dollars in thousands)
2008
IDterest
Average
Rate
f/olumeand Rate A nalysiso/Net Interest Income
The following table preSents the extent to which changes in volume and interest rates of interest-eaming assets and interest-bearing liabilities affected our interest income and interest
expense during the periods indicated. Information is provide4 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 (changes in rates by prior volume) and (iii) changes attributable to a combination of changes in rate and
volume (change in rates multiplied by the changes in volume). Changes attributable to the combIned Impact of volume and rate have been allocated proportionately to the changes due.
to volume and the changes due to rate.
Volume
Sill Months Ended June 30,
2009 VI. 2008
Inerease (Decrease) Due to Change In
Rate
(Dollars in thousands)
Total
As detailed in the foregoing tables, net interest income before provisio? for credit I?sses decreased mi!lion, or 7.6%, to $37.1 million for the six months ended lune 30, 2009, as
compared to $40.1 million for the six months ended June 30, 2008. Net mterest margm decreased 59 basIS points to 3.40"10 for the six months ended lune 30, 2009 from 3.99% for the six
months ended lune 30, 2008. The tables indicate a combination of higher average interest-eaming assets and lower yield. This was a result of the overall decline in interest rates
between the periods, which was the cause of the decline in the net interest margin. Interest income declined $4.9 million to $52.1 million for the six months ended June 30, 2009, as
compared to $57.0 million for the six months ended 30, 2008. Average bank loans to $1.13 billion for the six months ended lune 30, 2009, compared to $807
million for the six months ended lune 30, 2008. The YIeld on those assets dechned to 5.40% for the first SIX months of2009, as compared to 6.73% for the first six months of 2008. The
decline in the yield on community bank loans was caused by the decline in the prime rate of interest, which averaged 5.67% for the first half of 2008 compared to 3.25% for the first half
of2009.
Wholesale assets declined by $219 million to $941 million for the first six months of 2009, as compared to $1.16 billion for the first six months of 2008. The decline in the halance of
wholesale assets is consistent with management's strategy to reduce these assets. The reduction is principally comprised of repayments from borrowers. The wholesale assets have it
negative impact on our net interest margin, and the negative impact of such assets will lessen over time through continued repayments. The yield on wholesale assets declined 42 basis
points between the periods. The relatively modest decline in the, on wholesale assets is attributed to the annual reset schedule of wholesale loans, periodic floors, and the fact that
many of the mortgage-backed securities have not yet reached theIr Imtial reset date.
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2206
Overall, the cost of liabilities declined 40 basis points in the comparable quarters to 1.53% for the six months ended June 30, 2009, versus 1.93% for the six months ended June 30, 2008.
The average balance of interest-bearing liabilities increased by $235. miUion .. This was principally a result of the increase in money market and NOW accounts and certificates of
deposits which offset a decline in FilLBank borrowings. Money Il18dtet and NOW accounts incressed an average of $263 million, certificates of deposits $147 million and FHLBank
.declined $196 million. The overall growth in interest-bearing deposits was related to the successful marketing efforts by our regional banking locations. The increase in the
average balances was more than offset by in the costs, as total intc:rest expense. declined.51.8 periods. The decline in costs was consistent with the
decline in market interest rates between the penods. The maJonty of average nomnterest-beanng depOSits and a slgmficant portion of money market and NOW accounts are primarily
institutional deposits that are subject to subaccounting fees.
Through our Asset Liability Management Committee, we have a asset sensitive position to prospective changes in interest rates. Accordingly, as interest rates
increase from current levels, we would expect expansion of our net mterest margm.
provision for Credit Losses. The provision for credit losses was 510.5 million for the six months ended June 30,2009, compared to 54.0 million for the six months ended June 30 2008.
The provision for credit losses in the first half of 2009 was the result of the current economic environment that we have experienced in Colorado with regard to our bank
10805 and nationally with regard to our residential loans. Loan growth was modest in the first half of2009, at $16.4 million; which includes $44 million of the note receivable from the uw
Trust asset sale. During the first half of2009, based .on our review of the community bank loan portfolio, we considered it prudent to increase the allowance including the loss factors we
apply to construction and development 10805. This resulted in incremental 51: 1 mi!lion of provision We specific impainnents on certain loans, which resulted in $3.5
million of provision expense and increased the loss factors we apply to reSidential wholesale loans, which resulted m approximately $208,000 of additional provision expense. The
provision for credit losses for the first six months of 2008 reflected the growth of $228 million of community bank loans and two loans that were impaired and required Ii total provision
for credit losses of $1.1 million. For a discussion· of the Company's allowance for credit loss methodology see "Significant Accounting Estimates - Allowance for Credit Losses" in
Note I to our financial statements and, as it relates to nonperforming assets, see "Asset Quality." '
Nonlnterest Income. An analysis of the components ofnoninterest income is presented in the table below:
Six Months Ended lune 30,
1009 1008
Donar
Change
Percent
Change


Custodial, Administrative and Escrow Se"iees. Service fees decreased $236,000, or 45%, to $287,000 for the six months ended June 30, 2009, as compared to $523;000 for the six months
ended June 30, 2008. The decrease is consistent with the discussinn above under "Comparison of Results of Operations for the Quarters Ended June 30, 2009 and 2008 - Custodial,
Administrative and Escrow Services."
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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 fees or 17"11., to 52.2 million for the six months ended June 30, 2009, as
compared to $2.7 million for the six months ended June 30, 2008. This decrease IS consistent With the decline ID our mortgage loan servicing portfolio. This portfolio decreased to an
average balance of $866 million for the six months ended June 3.0, 2009, as compared to an of$I.01 billion for the six months ended June 30, 2008. Our average service
fee rate (including all ancill8l)' income) of 0.46% for the first SIX months of 2009 was three basiS pomts lower than the 0.49% rate for the first six months of 2008. We anticipate loan
administration fees will continue to decrease as our servicing portfolio decreases through normal amortization and prepayments.
Gain on Sale of Loans Held for Sale. Gain on sale was for the six months !une 30: 2009, as compared to 5324,000 for the six months ended June 30, 2008. During
the first six months of2009, the Company sold 59.1 JDllbon of ongmated loans from our SBA diVISion, which accounted for all of the gain on sale for the period. The loans included loans
we elected.to sell to maiJage industry concentrations. During the first six months of200S, we sold 5S.9 million of originated loans from our SBA division, which resulted in substantially
all the gain on sale realized in the period. Gains on sale of loans can fluctuate significantly 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 loan portfolios We elect to sell and market conditions.
Loss on Sale of Available for Sale Investment Securities. See "Comparison of ReSults of Operations for the Quarters Ended June 30, 2009 and 2008 - Losa on Sale of Available for Sale
Investment Securities." .
Other'-tban-Temporary Impairment. See "Comparison of ReSults of Operations for the Quarters Ended June 30, 2009 and 2008 - Other-tban-Temporary Impairment."
Gain on Sale of Investment. During the first quarter of 2009, the Company completed the sale of 269,792 shares of Matrix Financial Solutions, Inc. for 516.00 per share resulting in
aggregate proceeds of 54.317 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 5750,000; resulting in a gain on the sale of$3.567 million. Matrix Financial Solutions, Inc. is
the successor to the Company's formeJ:joint venture interest in Matrix SettleJDent and CleJJrsDce 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,lnc. are placed on deposit at the Bank.
Other IJICOme. Other income for the six months ended June 30, 2009 was $1.5 million, or $199,000 greater than for the six months ended June 30, 2008. The increase was the result of
settlement of a representation and warrsnty claim the Bank made against a large nationally recognized loan originator, from which the Company realized reveJDIe of $370,000. Other
income for the . first six months of 2009 principslly includes the foregoing, income earned on bank-owned life insurance of 5470,000, prepsyment penalties on loans and other loan fees
not recognized as part of yield on loans of 555,000, rental of .5200,000. on a property owned hy a that was sold in June 2009, and other miscellaneous items.
This compares to the first six months of 200S when other IDcome IDcluded IDcome earned on hank-owned hfe IDSUJ'BDct of 5477,000, prepayment penalties and other loan fees not
recognized as part of yield on loans of 5202,000, and rentil income of $207 ,000 on a property owned by a non-core subsidi8l)' and other miscellaneous items. .
NODIDterest ExpeDse. Noninterest expense increased 53.1 million, or 10%, to $35:0 million for the six months ended June 30, 2009, as compared to $31·.9 million for the six months ended
June 30, 200S. The following table details the major of noninterest expense for the periods indicated: .
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Six Months Ended June 30,
2009 2008
(Dollars in thousands)
Dollar
Change
Percent
Change·
Compensation and !\mployee benefits expense increased $421,000, or 3%, to $12.8 million for the six months ended June 30, 2009, as compared to $12.4 million for the six months ended
lune 30, 2008. The head count was relatively unchanged, at 230 for June 30, 2009 compared to 229 at June 30, 2008. This increase was consistent with the increase for the three months
ended lune 30, 2009, discussed above. Included in compensation and employee benefits were costs of$632,000 and $536,000 for our stock-based compensation plans for the six months
ended June 30, 2009 and 2008, respectively. The increase in stock-based compensation expense is consistent with the hiring of new employees to execute our business strategy.
Subaccounting fees, which represent fees paid to second parties to service d!lPOsitory accounts on our behalf, are incurred at the Bank in respect of custodial and institutional d!lPOsits.
Such fees declined $2.3 million, or 23%, to $7.4 million for the six months ended June 30, 2009, compared to $9.7 million for the six months ended June 30, 2008. This decrease was due to
the decrease in the interest rate upon which such fees are based. The average balance of deposits sul!ject to subaccounting fees declined $33.7 million to $1.10 billion for the first half of
2009 compared to $1.13 billion for the first half of 2008. Generally, suhaccounting. fees are tied to the Federal Open Market Committee target rate for overnight deposits. The average
target rate for the first six months of2009 was .25%, compared to 2.67% for the first SIX months of 2008.
Amortization of.mortgage servicing ,mcreased and was $1.4 million for il?th the months ended June 30,.2009 and 2008. of mortgage servicing rights is a .
function of the SIze of our mortgage servlcmg portfoho and the prepayment rates expenenced WIth respect to the underlymg mortgage loans wlthm the portfolio. The average balance in
our mortgage servicing rights portfolio decreased to $866 million at lune 30, 2009, compared to $1.01 billion at June 30,2008. Annualized prepayment speeds on our servicing portfolio
were 17.1% for the six months ended June 30, 2009, as compared to 16.3% for the SIX months ended June 30, 2008.
The lower of cost or fair value on loans held for sale resulted in a recovery of $325,000 for the six months ended June 30, 2009 compared to a charge of $565,000 for the six months ended
lune 30, 2008. In the six months ended lune .30, 2009, interest rates declined which in an increase !n the of assets. There also were approximately $30 million of
payoffs of the residential held for sale portfoho between lune 2009 and lune 2008 that ehlDlll/lted the valuation assocIated WIth such loans. For the six months ended lune 30 2008 the
charge of $565,000 was the result of deteriorating conditions in the marketplace for held for sale assets. . "
Occupancy and equipment expense $407,000, or 34%, !'> $.1.6 million for the six t,nonths June 30, 2009, as compared to $1.2 million for the six months ended June 30, 2008.
Occupancy and equipment expense IS shown net of the amortization of the deferred gam from the sale-leaseback of our headquarters building in Sjlptember 2006, which is
being amortized into income over the 10-year term of the lease. The amount of deferred gam realized was S579,OOO and S594,OOO for the six months ended June 30, 2009 and 2008,
respectively.
Deposit. insurance increased S2.1 million to S2.6 million for the first six months of 2009 compared to $492,000 for the first six months of 2008. See "Comparison of Results of Operations
for the Quarters Ended June 30, 2009 and 2008 - Noninterest Expense." - .
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The remainder of noninterest expense, and expense, professional fees, mortgage. subservicing fees, and other general and
administrative expenses, increased S33 mllhonto.59.5 mllhon for the SIX months ended June 30, 2009, as compared to $6.2 million for the SIX months ended June 30,2008. An increase in
professional fees was related to consult!ng seryices to model. on mortgage-backed and for loan collec.tion expenses. The increase in other general and
administrative expenses resulted from the Items discussed above ID Comparison of ResuUs of Operations for the Quarters Ended June 30, 2009 and 2008 - Noninterest Expense."
1 __ Taxes. The income tax benefit from continuing operations was 517.8 million for the six months ended June 30, 2009 compared to income tax provision of 52.7 .rullion fur the six
months ended June 30, 2008. The Company's effective tax rate for the three months ended June 30, 2009 and 2008 is below the statutory tax rate due to: (i) rea1izstion of New Markets
Tax which have been deployed at a subsidiary of the Bank, $654,000 5S93,000 .for the six months ended June 30, 2009 and lune 30, 2008, respectively; (ii) tax
exempt earnings, which principally relate to income from bank owned hfe IDsurance, and (III) a change In apportionment due to an increase in income allocable to the State of Texas in
2009.
The Company;s existing New Markets Tax Credits continue through 2012. 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 COmlnunity Development Financial Institutions Fund. The Company anticipates the deployment of these tax credits over the next six
to 18 months.
Balance Sheet
Totsl assets increased $163 million, or 1%, to 52.42 billion at June 30,2009 from 52.26 billion at December 31, 2008. Community bank loana held for investment increased by 5S0 million to
$1.09 billion at June 30, 2009, compared to 51.04 billion at December 31, 2008. The increase included the note received in connection with the sale of UW Trustassets in the amount of
544.1 million, net of related discount. Thus excluding this note, totsl community bank loans increased a modest $6 million in the first half of 2009. Wholesale loatts held for investment
declined $33.S million to $119.6 million at June 30, 2009 compared to 5213.2 million at December 31; 2008 from repayments of residential loans and purchased SBA loans. Loans held for
sale decreased 511.1 million to $279.9 million at June 30, 2009 as compared to $291.6 million at December 31, 2008 due to repayments of residential loans and the payoff of two multifamily
loans which offset an increase in originated SBA 504 and 7a loans. '.
Totslliabilities increased by $135 million to $2.29 billion at June 30, 2009 from $2.16 billion at December 31, 2008. The increase in liabilities was the principal result of an increase in
deposits inclusive of custodial escrow deposits which included $101 million in community banking deposits, and $46 million of institutional and wholesale deposits.
Investment Securities
See Note 3 to the consolidated financial statements in this report for detailed infotmation related to the Company's investment securities portfolio.
LOIIn Port/olio
Our major interest-eaming is our loan A significant part .of our asset and liability involves monito?ng the composition of our loan portfolio. The
table sets forth the composition of our held for IDvestment loan portfoho by loan type as of the dates IDdlcated. The amounts In the table below are shown net of premiums, discounts
and other deferred costs and fees.
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2210
June 38,1889 June 38, 11108
At June 30, 2009, total community bank loans increased to $1.09 as to $1.04 billion at 31, 2008 and $852.5 million at June 30, 200S.Commercial real estate loans
increased to $453 million, which represents an increase of $19 million smce year-end 2008. CommerclBlloans increased $27 million in 2009 to $161 million and are now 15% of the
community bank portfolio. Included in commercial loans is the $44.1 million note, net of received in connection with the UW Trust asset sale. The Company continued
to expand its national footprint through its SBA div!sion with SBA 504 and 7a lendmg activities. In addition, management is making a continuing effort to diversify the portfolio
into less riskier components, including owner-occupled commercial real estate.
The following table presents the details of the constroctioll and development ("C&D") portfolio for the periods indicated:
June 30, 1889 December 31, 1888
(Dollars in Ihousands)
In the first six months of 2009, the' C&D portfolio grew $7 million 10 $408 million and represented 26.4% of our enlire loan portfolio and 32.3% of our tolalloans held for investment
portfolio. The growth in Ihe portfolio is to SBA as belo:. At year 2008, 32.1% of the community bank portfolio. Within
the construction portfolio the loan breakdown IS approximately 39% smgle famtly, 42% commercial, and 19% mulltfamlly. The majority of the land development loans are for land that is
under development and is generally intended to either be sold 10 contractors or end users as lot loans for commencement of constroction. .
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2211
The Bank has no exposure to production builders and no warehouse lines to single-family mortgage lenders. The Bank's construction portfolio is located throughout Colorado
including several resort markets, (e.g., Aspen, Steambost Springs, and Breckenridge.) At June 30, 2009, the construction speculative to pre-sold ratio, excluding multifamily for rent
products, was approximately 55% to 45%. .
Aa of June 30, 2009, we have defined nine geographic regions for our C&D portfolio: eight in Colorado and one region for Insns outside Colorado. Within Colorado, four of the defined
geographic regions account for $314 million, or 77%, of the C&D portfolio, as shown in the table below. .
June 30,1009 December 31,1008
Outstandiug Pereent Outstanding Percent

The C&D loans located outside of Colorado include loans originated by our SBA division; ofwhicli $10.5 million are located in Texas and $1.4 million are located in Nevada. The
remaining C&D 1000000
s
located outside Colorado include two loans th. totaled $15.0 million located in Arizonil. There were no C&D loans located in California or Florida.
SBA originated loans consist of the following and are included in the community bank loan totals above:
June 30,1009 December 31, 2008
••
Total $ 158,055 $ 134,434
The Bank's SBA division is 8 participant in the preferred lenders .program ("PIP') ofthe United. SmaIl Business At June 30, 2009, SBA originated loans
consist ofS56.1 million ofSBA 504 loans, $4.2 million of guaranteed portions ofSBA 7a loans, $19.9 mdllon of unguaranteed portions ofSBA 78 loans, $35.0 million of construction
Insns and $42.8 million of conventional commercial real estate loans. These loans are included in the totals discussed above. Generally, SBA department construction lnsns will become
8 SBA 504 loan upon completion of construction •.
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Asset Q.lllity
As part of our asset quality function, we on a basis. Loans. are placed on nonaccrual when full payment of principal or interest is in doubt or when
they are 90 days past due as to either pnnclpal or mterest. During the ordInary course of may. become of borrowers that may not be able to meet the
contrsctua1 requirements of loan agreements. These loans are placed under close SUpervISIon,. WIth consIderation gIven to placmg the loan on nonaccrual status, increasing the
allowance for credit losses and (if appropriate) partiBl or full charge-off. Nonsccrua1loans are further classified as impaired when the underlying collaters1 and other originally identified
sources of repayment are considered insufficient to cover principal and interest and management concludes it is probable that we will not fully collect all principal and interest according .
to contrsctual terms. After a loan is placed on nonaccrual status, any interest previously accrued but not yet collected is reversed against current income. If interest payments are
received on nonaccrua1loans, these payments are applied to principal and not taken into income. We do nol place loans 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 acCl1!e interest when the loan is past due 90 or more days,
if and to the extent that the interest on these loans is iosured by the federsl government The aggregate unpaid principal balance of government-sponsored accruing loans that were
past due 90 or more days Was $6.7 million, $6.5 million and $6.8 million at lune 30, 2009, and June 30, 2008, respectively. Substantially all of these 10ans were
originated by our subsidiary Matrix prior 200.3. .programs financla! to buy back mortgage loans that meet certain
criteria from the securitized loan pool for whIch the IDstitutjon proVIdeS servIcIng. At the servlcer'S option and WIthout GNMA's pnor authorization, the servicer may repurchase such a
delinquent loan for an amount equal to 100 percent of the remaining principal balance of the loan. These guaranteed accruing loans are not included in the table of nonperfonning loans
or in the discussion of delinquent loans below.. . .
The following table sets forth our nonperfonning held for investment assets as of the dates indicated:
At June 30, 2009, total loans were $28.4 million, compared to $S.6 million at December I, 200S and $6.S million at June 30, 200S. Management analyzes and reviews
nonperfonning loans by loan type. Residential nonperfonning loans represent wholesale. assets acquIred. purchase by prior management The balance of nonperfonning
residential loans increased $629,000 at June 30, 2009, compared to December 31, 200S, and Increased $2.4 nullton versus June 30, 2008. Oversll, nonperfurming residential loans totaled
$3.9 million, $3.2 million, and $1.5 million, at June 30,2009, December 31, 2008, and June 30, 2008, respectively. This represents 3.80%, 2.58%, and 1.0S% of the residential portfulio for
those respective periods: The increase in nonperfonning residential loans as a perce?tage o.f the. portfolio is due to the current economy and continued repayments of the
. remaining perfonning portion of the portCo,lio.. The Company's of loans IS consistent with the national marltetplace based on information
published by the Mortgage Bankers AsSOCIation. The Company s wholesale portfolto IS geogmphlcally dIspersed. The average loan size of the wholesale residential loan
portfolio is approximately $130,000 and consists of loans that on. average are approxImately S.5 years seBSC?ned at June 30,·2009, were underwritten to Bank policy requirements at the
time of acquisition, and bore FICO. scores over 700 WIth. lmu:t0-value and We believe the risk of loss associated withtl)is portfolio is
considerably lower than losses assocIated WIth other types of lendlDg, whIch IS eVIdenced by our hlstonca1loss expenence from the residential portfolio. We 'expect future levels of
nonperfonning loans in the residential portfolio to be generally consistent within the national and regional economic marltets in which the loans are located
At June 30 2009 the Company owned $272,000 of mortgages that met the regulatory definition of "sub prime" at the date of purchase pr origination, of which $9 000 was
nonperfonnlng. prior yeats, the Company originated subprime mortgages its mortgage subsidiary, and occasionally the Bank also purchased
mortgages. These activities ceased several years ago, and the Company's current holdtngs represent the rem81nder of such activities. The Company is not now active in the subpriine
market and has no inteotion of becoming involved in the .
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2213
Nonperfonning community bank loans totaled $24.6 $4.6 m!1!ion, and $4.1 miIliou at 30, 2009, J?ilcember 31, 2008, June 30, 2008, respectively. Nonperfonning community
bank loans increased in 2009 due to the current economl<c conditions. In total, nonperfonmng held for IDvestment community bank loans represent 2.26% of the community bank
portfolio at June 30,2009, compared to 0.45% and 0.48% at December 31, 2008 and June 30, 2008, respectively.
The following table sets forth oUr nonperforming held for sale assets as of the dates indicated:
June 30, 2009 December 31, 200B June 30, lOOB
Nonperforming held for sale assets declined in the first half of2009 .. Multifiunily loans held for sale declined by $5.2 million as the Bank accepted short sale payoffs for
both loans that comprised the balance at December 2008. In the residential portfolio the mcrease hetween June 2009 and December 2008 and lune 2008 is consistent with the national
housing marketplace. < <
A.UoWllnce/or Credit Losln
Management believes the allowance for credit losses is critical to the understanding of our condition and results of operations. Selection and of this "critical
accounting policy" involves j!ldgments, estim,ates, suaceptible to the event that assumptions or conditions were to occur, and depending
upon the severity of such differences, a matenally different financial condition or results of operations IS a reasonable POSSibility.
We maintain our allowance for credit losses at a level that management believes is adequate to absorb probable losses inherent in the existing loan portfolio based on an evaluation of
the collectability ofloans, 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 exceptioll 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 by a .hisl?rical !oss given rate by loan to determine an appropriate level for the for credit losses. A specific
reserve may be needed on a loan-by-Ioan basiS. Loans With nsk between and ten are mOnitored closely by the loan officer, credit administration, and the asset quality
committee, and may result in specific reserves. T\Je 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 iru:ludes the for both held for investment
wholesale and community bank loans: .
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2214
Quarter Eaded JUDe 30, Six Moutbs Eaded June 30,
100' 1008 100' 1008
Net charge-offs in the held for investment community b.ank of represent a 30 basis point annualized level compared to the second quarter of 2008· when community
bank portfolio net cbarge-offs were $15,000 or one pomt. Net loan charge-offs. were $0 and. $48,000 for the quarters ended June 30, 2009 and 2008, respectively. On an
annualized basis, this represents losses of 0 basis pomts and five basIS pomts for those same penods, respectively.
The table below provides a break-out of the allowance for credit losses by loan type:
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2215
The following table presents a summary of significant asset quality ratios for the held for investment portfolios for the period indicated:
JUDe 30, ZOO') . December 31, 2008 JUDe 30, 2008
The percentage of the allowance for credit losses to Donperfonni.ng loans varies due to of our of loans and the risk of loss associated with those loan portfolios. We
analyze the allowance for credit losses related to the nonperfonmng loans by loan type, hlstoncal !oss expenence and loans measured for impairment In conjunction with other factors.
this loss exposure contributes to the overall assessment of the adequacy of the allowance for credit losses.
The allowance for credit loases allocated to community bank loans to total held for investment nonperfonning community bank loans was 330"A.; and 272%. at lune 30,2009.
December 31. 2008. and lune 30. 2008. respectively. The allowance for credit losses to nonperfonning community bank loans is both asset dependent, and. is based on anticipated losses
inherent in such loans. The allowance for credit losses allocated to residential loans to held for investment nonperfonning residential loans was 24%. 28%. and 44%. at lune 30. 2009.
December 31. 2008. and lune 30. 2008. respectively.
The total allowance for credit losses to total loans increased to 2.02% at lune 30, 2009. compared to 1.30"/" at December 31. 2008 and 1.08% at lune 30. 2008. The overall increase in the
allowance is related to the overall increase in nonperfonning loans. the growth in the community bank portfolio. certain loan grading changes. an increase in the loss factors we apply to
construction and development loans and allowance related to impairments. The total allowance for residential loans was .90% at lune 30. 2009, compared to .72% at December 31, 2008
and .47% at lune 30. 2008.
The increase in the allowance for credit losses is related primarily to the balance sheet transformation and is reflective of the higher allowance attributabie to community bank loans in
generai as companid to residential loans, as well as the current economic conditions. The allowance for held for investment community bank loans was 2.26% at lune 30. 2009. 1.47% at
December 31. 2008, and 1.30% at lune 30. 2008. The increase in the percentage of the community bank allowance at lune 30, 2009. compared to June 30. 2008 was due to the factors
discussed above.
Liquidity
The Bank is focused on generating traditional deposits from its expansion of community banking services through the opening of branch locations along Colorado's Front Range and
selected mountain communities. 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:
June 30,1009
Amount
Average
Rate
December 31, 2008
Average
Amount Rate
(Dollars in thousands)
JUDe 30, 2008
Amount
Average
Rate
<". c.: ...•. ·.',:.••. ' .•• ... ... ro .•o9 ... ··.' .•. 'I .••. ': •. , .•:.i .. : .•... .... :.;,.. ',: ..•'.".'.'.:'.' ...: .• ·.;:.: .•·.,.• ... ' ... .. •.. .. .. ••: ....•... ..•. •..•..•.,.:.' .•. ",'.:.. ,: .•...••...•...• .. :.l .• ..;.,,'.:.,.. ' .. :, .. : .... :"..':.,','." .•.•. ...•. : ..... ', .... : .•... , .... : ..,.,•.•. , ..: ....... .•. , ..., ... :.; .. ...:.:.: .. :.,.: ..•. .... : .... ,:.i7 .....%.' . .... .... •. .. '.;.•,'.:... :.·,:.· ..:,i.:.:.' .......•.. ,'., .....'.:,:.:.•... : .• ,n.
66
,.·.: ..;; ...· .•.ol . •..L .. ....... ··... •.·.'.: ..,,'.,.·.·.: ... ...•.•.,·.i•...•.••.•• , •• .•. : ••.•• :.: .•. ' •••.•• ,.;, •. ',',.,:.•••. :.',; ... ': ..; ••:.', •••. , ••',,:,' .••••• ,.,.: ••. ,:••"g ..·.' ..... ....•.2.:.L ..•. "'·.
, . "",.;D.>"" .• ''''' .. •• "_,,,,;> .,.:. ""'''',
Subtotals 1,590,436. 0.48 1.583,200 0.55' ,. 1410.065 ". 0.64 ",
.··:'t ., ,'; '·.i,·; ....... ',;";
Total deposits increased $135 million between June 30. 2009 and 31, 2008. Our depos!ts increased approximately $101 million since year end. This growth
includes $63.4 million in certificate accounts offered through the Certificate of DepOSit Account RegiStry Servlce@ (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 member of the CDARS network. .
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2216
The following table sets forth the balances for categories of deposits and custodial escrow balances of the Bank by source for the periods indicated:
June 30,1009 December 31,1008 lune30, 1008

Other who esale deposits .. . .... .. ............ 7,550 . 27,038 . 16,241
.. ... ·:. ', .. $;k ...... ", ..
Community bank deposits represent deposits attracted by our regional banking tesms as discussed above. UW Trust and Matrix Financial are our wholly owned subsidiaries. The
decline in balances at UW Trust is due to an account for one life settlement agent for special asset acquisitions and administration with a balance of $917,000, $30 million, and $59.4
million at June 30, 2009, December 3 I, 2008, and June 30, 2008, respectively. Management elected to restructure this relationship and terminate certain elements of business with respect
to this large life settlement agent account. The restructured relationship will now allow the Company to pursue business in the same industry on a non-exclusive basis subject to the
prior approval of the Texas Department of Banking, UW principal regulator. The at Matrix Financial at June 30, 2009, compared with year' end 2008, isa seasonal
fluctuation because many jurisdictions require tax payments In the fourth quarter of the year, whIch reduces escrow balances near year end. Prospectively, we this balance to
decline consistent with the declining mortgage servicing business and our decision to reduce that activity. Matrix Financial Solutions, Inc. ("MFSI") deposits represent customer assets
under administration by MFSI. The Company sold its approximate 7% interest in MFSI during the first balf of 2009. The balance of theSe deposits incressed approximately $6 million
since December 31, 2008 due to timing of cash flows. Legent LLC deposits tha! represent deposits received through Legeot Clearing, LLC. Certain officers of
the Company own an indirect minority financial interest (under DIne percent) m Legent Cleanng. DepOSIt concentrations are deposits that represent deposit funds tTom six, six and three
institutional relationships maintained by the Bank as of June 30, 2009, December 31, 2008, and June 30, 2008, respectively. Incloded in deposit concentrations are iiistitutiqnal balances
tTom Equity Trust, with balances oU84!.7 million, $822.8 million and $766.4 million at June 30, 2009, December 3 1,2008, and June 30, 2008, respectively. The balanCC!i from Equity Trust
includes the custodial deposits associated with the UW Trust asset s.ale. See discussion .of depoS!1 co?centrations in this Fonn 10-Q for June 30, 2009,ltem lA. "Risk Factors-
Risk Related to Our Business" and Note 8 - "Deposits" to our consohdated financIal statements mcluded In thIS report.
Bank Uquldlty. Liquidity management is monitored by an Asset Liability Management Committee, consisting of members of management and the board of directors of the Bank, which
reviews historical funding requirements, current liquidity position, sources and stability of funding, marketability of assets, options for att'racting additional funds, and anticipated·
future funding needs, including the level of unfunded commitments.
Our primary sources of funds are retsil, commercial and institutional deposits, advances from the FHLBank and other borrowings and funds genemted tTom opemtions. FundstTom
operations include principal and interest received and While and amortization of IOIIOS and securities provide an indication of the
timing of the receipt of fuods, changes in mterest rates, econonuc condItIOns and competition strongly mfluence mortgage prepayment mtes and deposit flows, reducing the
predictability of the timing on sources offunds.
The Bank has an internal policy that requires certain liquidity ratios to be met. That current policy requires that we maintain a set amount of liquidity on the Bank's 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".4 of the assets of the Bank. At June 30, 2009, the Bank had unused borrowing capacity at FHLBank of approximately $226
mi1li9
n
. The Bank maintains a contingent liquidity facility with the Federal Reserve Bank, and at June 30, 2009, there was no amount outstanding and $24.0 million of unused borrowing
capacity.
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.2217
At June 30, 2009, the Bank had outstanding letters of credit, loan origination commitments and unused commercial and retail lines of credit of approximately $192 million. Management
anticipates that we will have sufficient funds available to meet current origination and other lending commitments.
Company Liquidity. Our main sources ofliquidity at the Company level are cash, notes receivable, dividends and tax payments from our subsidiaries, as well as a revolving line of credit
maintained with a large money center correspondent bank in the total amount of $30 million. As of March 31, 2009, we had $30 million drawn under this facility. Management extended
the facility, which matured June 29,2009, to September 30, 2009. Management anticipates renewing thisfacility prior to its maturity.
The Company relies 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
long-term inability ofa subsidiary to make dividend payments could significantly impact the Company's liquidity. Historically, the Bank has made the majority of the dividend payments
received by the Company. The Bank made dividend payments to the Company from the second half of 2006 through June 2008 which totaled $14.2 million. UW Trust made dividend
payments to the Company of cash and other assets at June 2009 of $38.3 million. Prospectively, based on capital ratios and other factors, management expects the Bank will pay
dividends at the rate of approximately 25% to 40"10 of the Bank's net income. If dividends and tax payments from subsidiaries are not sufficient to fund the cash requirements of the
Company, the Company will utilize excess cash resources of other non-core subsidiaries.
The Company commenced a quarterly cash dividend program in 2007 and paid quarterly cash dividends in the amount of $.06 per share since commencing such program. Given current
economic conditions, the Board elected to reduce the dividend. On August 6,2009, a cash dividend of$O.Ot per common share was declared for shareholders of record on September 4,
2009, payable on September 15,2009. The ability ofthe Company to declare and pay a dividend prospectively wi!! depend on a number of factors, including future earnings, dividends
received from the Bank, capital requirements, financial condition and future prospects and such other factors that our Board of Directors may deem relevant. See further discussion of
liquidity risk in Part II, "Other Information" Item tA, "Risk Factors" included in this report.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The disclosures set forth in this item are qualified by the section captioned "Forward-Looking Statements" included in Item 2. Management's Discussion and Analysis of Financial
Condition and Results a/Operations a/this report and.other cautionary statements set/orth elsewhere in this report.
See the discussion of market risks included in Item 7A. Quantitative and Qualitative Disclosures About Markei Risks in the 2008 Form tOoK. There has been no significant change in the
types of market risks faced by the Company since December 31, 2008.
At June 30, 2009, management believes the Company's interest rate risk position is neutral with modest asset sensitivity. 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.
Item 4. Controls and Procedures
Eva/uation of Disc/osure Controls and Procedures
An evaluation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the "Act"» was carried out as ofJune 30, 2009 under
the supervision and with the participation of our Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer and several other members of our senior management; Our
Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer concluded that, as of June 30, 2009, the Company's disclosure controls and procedures were effective in
ensuring that the information we are required to disclose in the reports we file or submit under the Act is (i) accumulated and communicated to our management (including the Chief
Executive Officer, Chief Financial Officer and Chief Accounting Officer) to allow timely decisions regarding required disclosure, and (ii) recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms.
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2218
Chllnges ill /lIterlUll COlltrols
There were no changes in our internal controls over fmancialreporting for the quarter ended June 30, 2009, that have materially affected, or are reasonably likely to materially affect,
such controls.
We do not expect that our disclosure controls and procedures and internal control over reporting will prevent all error and all ftaud. A control procedure, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance that the objectIves of the control procedure are met Because of the inherent limitations in all control
procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of ftaud, 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 in controls or procedures can occur because of a simple error or mistake.
controls can be circumvented by the .individual of some by collusion of two or more people, or by management override of the control. The design of any
control procedure also is based in part upon certaID assumptions about the bkehhood of future events, and there can be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions; over time, controls may become ii1adequate because of changes in conditions, or the degree of compliance with the policies or
procedures may deteriorate. Because of the inherent limitations in a cost-effec;tive control procedure, misstatements due to error or ftaud may occur and not be detected. ,
Part 11- Other Information
Item 1. Legal Proceedings
Legal proceedings of the Company are more fully in Note 16. to the ststenients in the Co.mpany's. Form lOoK year ended December 31,2008. During the
six months ended June 30, 2009, there were no matenal changes to the mformallon preVIously reported, except as dIsclosed m Note 16 CommItments and Contingencie3 - Contingencies
_ Legal to the consolidated financial statements included in Part I of this Form 10-Q and which are incorporated herein by reference. '
Item lA. Risk Facton
During the six months of 2009, we have l\II1ended our risk factors from the Risk Factors previously reported in the Report contained in the Company's Form lOoK for the year
ended December 31, 2008 as follows:
Risks Related to Our Business
Our business may be advendy affected by conditions in the finaneial markets and economic conditions generally.
The United States is currently in a recession. Business activity across a wide range of industries and regions is greatly reduced and local governments and many businesses are
experiencing serious financial difficultY due the lack of consumer spending and lack ofliquidity in the credit Unemp!oym.ent has increased significantly. Since mid-2007,
the financial services industry and ,the secunl1es markets generally have been matenally and adversely affected by slgmficant dechnes m the values of nearly all asset classes and by a
serious lack of liquidity and a lack of financing for many investors. ,
Market conditions have also led to the failure or merger of a number of prominent insured depository institutions. In addition, declining asset vallies, defaults on mortgages and
consumer loans, and the lack of market and investor confidence, as well as other factors, have all combined to cause rating agencies to lower credit ratings for many debt instruments
including mortgage-backed securities, and to otherwise increase the cost and decrease the availability of liquidity, despite very significant declines in Federal Reserve borrowing
and other U.S. government actions.
Some banks and other lenders have suffered significant losses and have become reluctant to lend, even on a secured basis, due to the increased risk of default and the impact of
declining asset values on the value of collateral. The foregoing has significantly weakened the strength and ,liquidity of some financial institutions. In 2008 and 2009, the U.S.
government, the Board of of the Reserve System, the the Deposit or the FDIC, and other regulators took
numerous steps to increase liquidIty and to restore IDvestor confidence, mcludmg IDvestmg ID the equIty of other banking orgaDlzatlons, but asset values have continued to decline
'and access to liquidity continues to be very limited. '
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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.
The current financial market conditions were precipitated by falling and rising home loan deli.nquencies and foreclosures. This has negatively impacted mortgage-backed
securities supported by real estate mortgage collateral and whole slOgle-famdy mortgage loans, both of which are owned by our company. At June 30, 2009, we owned $433 million of
mortgage-backed securities and $302 million of single-family mortgage loans.
Overall, during 2008 and 2009, the economic environment has been for households and businesses in the United States. The economic environment in the State of
Colorado and the markets in which we operate has been less adverse than In the UDlted States generally, but may continue to deteriorate. The business environment in .the State of
Colorado and the United States may continue to deteriorate. Continued deterioration in the business en'l'ironments 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.
United Western Bank relies on institutional deposits, which, if one or more Institutional relationahlps WIllI terminated, such termination eonld negatively Impact our IIqnidlty,
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 institutional relationships maintaiDed by the
Bank. At June 30, 2009, six unaffiliated institutional relationships accounted for $1.19 billion, or 62.7%, of our total deposits, which includes custodial escrow deposits. Included in
these six unaffiliated institutional relationships is one institutional relationship with a balance ofS841.7 million at JUDe 30, 2009, which accounts for 44.3% of the Bank's total deposits at
June 30, 2009. At June 30, 2009, other related institutional deposits accounted for $303.6 million. Matrix Financial Solutions, Inc. accounted for $209.0 million of the· Bank's total
deposits and Legent Clearing, a company in which certai? direct?rs and officers of our company ·own an indirect minority interest, accounted for $94.6 million of the Bank's total
deposits. Institutional depositors generally more sensilive t? rate levels who.bank at a branc.h office due.to the amount of money such institutil!nal
depositors maintain on deposit. The Bank s future success 10 retalOlOg and attractlOg InstltullOnal depOSItors depends, 10 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 institutional 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 reaSOD. Further, an institution may elect not to renew the agreement or to terminate the deposit relationship for
various reasons, including, but not limited to, ifthere is a serious impairment to the Bank's financial c.ondition or if the Bank fails to be well-capitalized. If the Bank loses one or more of
these institutional relationships, our liquidity, profitability and results of operations may be significantly and adversely affected.
Pursuant to an asset purchase agreement dated April 7, 2009, Equity Trust Company and Sterling Administrative Services, LLC, or the Buyers, purchased from us the assets ofUW
Trust associated with its self-directed individual retirement account and qualified employee benefit plan administration business. The Buyers, and their affiliate, Equity Administrative
Services, Inc., have agreed to maintain all of their custodial with the Bank for a three-year These deposits are included in the amounts set forth in the
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 be significantly and adversely affected.
Future growth or operating results may reqaire us to raise additional capital, but that capital may not be available or it may be dilutive.
We are required by the Office of Thrift Supervision, or the OTS, to ma.intain adequate levels of capital to support our operations. To the extent our future operating results erode capital,
subordinate-tranche mortgage-backed securities are downgraded as discussed below, or we elect to expand through loan growth or acquisitions, we may be required to raise additional
capital. Our ability to raise capital will depend on conditions in the capital markets, are control, and on our financial performance. Accordingly, we call1ot be assured
of our ability to raise capital when needed, on favorable terms or at all. Ifwe cannot raise additional capital when needed, we wjll bedbject to increased regulatory supervision and the
imposition of restrictions on our growth and .. These negatively impact. our to operate or further expand. our operations through acquisitions or the
establishment of additional branches and may result ID IDcreases ID operatmg expenses and reducllons m revenues that could have a material adver.se 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 bO.\lk value of our common stock and
reduce our shareholders' percentage ownership interest to the extent they do not participate in future offerings.
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In the event we faU to comply with our restrictive debt covenants uuder our senior credit facUlty, we may not be able to obtain the necessary amendments or ·waivers, aad our lender
eonld accelerate the payment of all outstanding amounts due under that arrangement. .
Our ability to meet the nonperforming assets plus real estate owned ratio, or NPA Plus Ratio, 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, financial covenants that the Bank, at all times, a NPA Plus RBO Ratio of not greater than 4.5%. The NPA Plus RBO
Ratio means the ratio of the sum of nonperformmg assets (less nonperformmg assets guaranteed to prmclpal 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. Ifwe were to breach any of these covenants, ratios, tests or restrictions, as applicable, in the future, it could result in an event of default, which would allow lender to
declare all amounts to be immediately lIue and payable. If the lender accelerates the payment of our indebtedness, we may not be able to repay in full 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.
In the event we breach a covenant in the future or we expect that a breacb may occur, we would seek to obtain a waiver from our lender or an amendment to our facility; however, we
may not be successful in obtaining necessary waivers or a?,ending our facility. Even if.we are obtaining waivers or entering into any such amendments, we could incur
substantial costs in doing so, our borrowing costs could mcrease, 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 tbere can be no assurance that we would be able to obtain the necessary waivers
or amendments on commercially reasonable terms, or at all.
We may be required to pay significantly higher FDIC deposit lnauranee premiums and assessments in the future.
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 ofthe FDIC to historical lows. The FDIC expects a higher rate of insured depository institution failures in the next few years compared to recent
years; tbus, 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, 20 \3. These developments will cause the premiums assessed on us by the FDIC to increase and materially increase our noninterest expense.
On December 16,2008, the FDIC Board of determined deposit rates for the first quarter of 2009 at 12 to 14 basis points per $100 of deposits. Beginning
April I, 2009, the rates increased to 12 to 16 basis pomts per $100 of deposits. Addillonally, on ¥ay 22, the FDIC announced a final rule imposing a special emergency assessment
as of lune 30, 2009, payable September 30, 2009, based on $0.05 fo.r each ?fassets,l.ess Tier I capital, as of June 30, 2009, but the amount of the assessment is capped at 10 basis
points of domestic deposits. The final rule also allows the FDIC to Impose emergency assessments on or after September 30, 2009, of up to 5 basis points per quarter,
if necessary to maintain public confidence in FDIC insurance. The FDIC has mdlcated that a second assessment is probable. These higber FDIC assessment rates and special
assessments will have an adverse impact on our results of operations. Our FDIC insurance related costs were $2.6 million for the six months ended Julie 30, 2009 compared to $1.0
million and $818,000 for the years ended December 3\., 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 to cover any loss O! expe.nses arising from the TLGP program, the FDIC is authorized to impose an
emergency special assessment on all IDslltuhons. The has authOrity to charges for TLGP program upon depository institution holding
companies.as well. These changes, along With the full ullhzahon of our FDIC depOSit IDsurance assessment Credit ID early 2009, will cause the premiums and TLGP assessments charged
by the FDIC to increase. These actions could significantly increase our noninterest expense in 2009 and for the foreseeable future.
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Our allowauce for credit losses may be lusuflieient..
We maintain an allowance for credit losses, which is a reserve established through a provision for credit losses charged to expenae, that represents our management's best estimate of
probable inhereutIosaes within the existing portfolio ofloans. The in the of management, is. to for estimated credit losses !lnd risks inherent in
our loau portfolio. The level of the allowance reflects management s contlDulDg evaluallon of mdustry concentrations, specific credit flsks, loau loss experience, current loan portfolio
quality, present economic, political and regulatory conditions inherent the and been increasing as the economy worsens. The
determination of tbeappropriate level of tbe allowance for credit losses IDherently IDvolves a high degree of subjectIVIty and requires management to make significant estimates of
current credit risks and inherent and as-yet-unidentified losses in tbe portfolio, all of wbich may undergo material changes. In addition, the OTS periodically reviews our allowance for
credit losses and may require an increase in tbe provision for credit losses or the recognition of furtber loan charge-offs, based on judgments different tban those of management. In
light of tbe current economic environment, significant additional provisions for credit losses may be necessary to supplement the allowance for credit tosses in the future. If charge-offs
in future periods exceed tbe allowance for credit losses, we will need additional provisions to increase the allowance for credit losses. We canuot assure you that we will not increase
the allowance for credit losses further or tbat tbe 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, lind may have a material adverse effect on our financial condition and results of operations and
binder our ability to inake payments on. the outstanding obligations of our company. .
A signlfleant portion of our loan portfolio Is secured by real estate, and a contl.ued downturn I. tbe economy within the markets we could sigalftcantly hurt our business and
prospects for growtb.
Real estate lending (including commercial, construction, land developmeut, and residential) remains a Itirge portion of the Bank's loan portfolio. Tbese categories constitute $1.2 billion,
Of approximately 78% oftbe Bank's total loan portfolio as of Juue 30, 2009. Real estate values are generally affected by cbanges in economic conditions, fluctuations in interest rates
and the availability of loans to potential purcbasers, in tax and otber laws and acts of nature. A downturn in the real estate markets in wbich the Bank originates, purchases
aud services mortgage and other loans could burt our busmess because tbese are secured by. real estate. In addition, even thougb the Bank's real property collateral is currently
located tbrougbout the United States, we believe that the of s.uch collateralm whlcb at June 30, 2009 was $758 million, or 49% of our total loan portfolio, is likely to
increase as a result of our community banking strategy. A continuatIOn of tbe downturn m the real estate markets wbere tbe 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, aud finisbed homes in many markets including those where we do business. At June 30, 2009, approximately 12.4% of .
our assets were single-family. mortgage loans. We bad approximately $3.9 million of nonperforming, single-family mortgage loans iu our held for investment portfolio and $8.8 million of
nonperforming single-family mortgage loans in our held for sale portfolio at June 30, 200? If housing markets in our market areas continue to deteriorate, we may experience a further
increase in nonperforming loans, provisions for loan losses, charges to reduce the carrymg value of loans held for sale to the ·Iower 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 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 operallons. . .
The residential and commercial real estate sectors of the U.S. economy experienced an economic slowdown that bas continued in 2009. Specifically, the values ofresidential and
commercial real estate located in our market areas have declined, and these declines may continue in the future. If tbe loans that are collateralized by real estate become troubled during
a time when market conditions are declining or bave declined, then we may not be able to realize the full value of the collateral that we anticipated at the time of originating tbe loan,
which could require us to increase our provision for credit losses and adversely affect qur financial condition Ilnd results of operations. .
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We are .ubject to rI.k related to our coucentration of construction and land development and commercial real estate loans.
As of June 30, 2009, we had $306.7 milliou loans SI0!.7 million development loans, of which $359.8 million, or 8,8% of the aggregate ofsuch loans, are for
projects located in Colorado. Construction loans are subJect to nsks dunng the constructlon 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 e;tateconstruction loans may involve the disbursemen! of substantial .funds with 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 nsks of default ID the even.t 10 property values or volatility in the real estate market during the construction
phase. Our practice, in the majority of instances, IS to secure the of IOdlVlduals In support of our real estate loans which provides us with an additional
source of repayment. At June 30, 2009, we had five nonperfonmng con.struction developlUentloans that totaled mtlhon and another $2.3 million of assets that have been
foreclosed. If one or more of our larger borrowers to their construction loans, and we did not have alternative sources of repayment through personal
guarantees or other sources, or if any ofthe aforementIOned nsks were to occur, we could IRcur slgmficant losses., '
At June 30, 2009, we had $453.3 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 management prsctices and capital levels should be commensurate with the level and nature of their commercial real estate
concentration risk. Banks with higher levels of commercial estate loans .are expected to implement impro.ved 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 co!,!merclal real estate lendlOg growth and exposures. If there is deterioration in our
commercial real estate portfolio or if the OTS concludes that have not nsk management policies and practices, it could adversely affect our business and
result in a requirement of increased capital levels, aud such capital may not be avadable at that time. ' "
Tbe mortgage loans that the Bank bolds are subject to risks of delinquency, foreclosure and loss, wbleb could reaolt in, 108m to us.
The residential and commercial mortgage loans held in the Bank's loan portfolio are secured by and commercial properties and are subject to risks of delinquency, foreclosure
and loss of principal and interest. The ability a borrower to repay a loan 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 portfoho IUclude:
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;
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increases in interest rat!'s and/or 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.
In the event ofthe bankruptcy of a mortgage 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, lis 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 can be expensive lengthy praceas that can have a substantial negative effect
on our originally anticipated return on the foreclosed mllrtgage loan. Prospectively, It IS poSSible there Will be cbanges m bankruptcy laws, as well as other rules and regulations that
irnpact.delinquent mortgage loan borrowers that could negatively impact the total recovery we realize·on mortgage loans.
De Bank bas invested in loan portfolios, pooled securities and mortgage-baeked obllgatlons,wblcb may lead to volatllty in easb flow and market risk.
The Bank's asset portfolio contains . large portfolios single-family residential through bulk purchases and purchased U.S. Small Business Administration, or 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 the underlying ?otes will prepay at a rate, generating an expected yield. Prepayment rates generally
increase as interest rates fall and decrease when mterest rates rise, but changes m prOJlayment rates. are difficult to prediCt. Some of the Bank's mortgage-backed securities and many of.
oUf 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 loan portfolio and amortize such premiums over the expected lives of our mortgage-backed
securities and loans held for investlnent. If the underlymg assets that the Bank acqUired or that secures our mortgage-backed securities prepays more rapidly than anticipated, we
would have to write-off or amortize the premium on lin accelerated basis, which would adversely affect our profitability. .
Our business Is subject to Interest rate risk.
Our company's earnings and cash flows are largely our net Net income is the difference between interest income earned on interest-eaming
assets such as loans and securities and interest expense paid on mterest-bearlng hablhtles such as depOSits and borrowed funds. Interest rates are highly sensitive to many factors that
are beyond our control, including general ofvarious g?vernmental and agencies in particuhlr, the Board of Governors of the Federal
Reserve System. Changes in monetary pohcy, Includmg changes II! mterest rates, could mfluence 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; and
the averilge duration of our company's mortgage-backed securities portflliio.
If the interest rates paid on deposits and other borrowings increase at a faster rate than rates received 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 mterest rates received on loans and other investments fall more quickly than the interest
rates paid on deposits and other borrowings.
Althougb our management believes it has implemented effective asset. and management strategies to reduce the potential effects of changes in interest rates on our company's
results of operations, any substantial, unexpected, prolonged change m market IDterest rates could have a material adverse effect on,our company's financial condition and results of
operations.
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Continued dllcllnes In interest rates wo .... likely burt our eirnlngs.
Tbe decline in market interest'rates tbat occurred in 2008 and in particular in the fourtb quarter of 2008 negatively impacted our net interest income. Wbile we believe that the continued
implementation of our community bank plan, and change asset and liability mitigate the impact oflower market rates, any additional declines in
interest rates are expected to have a negallve Impact on net mterest Income, net mterest spread, net mterest margm, and overall results of operations.
We must effectively manage our eredIt risk.
There are risks· inherent in making any loan, including risks inherent iii 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. Tbe Bank aftempts to minimize its credit risk with prudent loan application approval procedures
including an analysis of the credit risk, a valuation of collateral, monitoring of loan· concentration within specific industries and geographic locations and
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 econolllic conditions and the possibility ofloan defaults.
Additional market concern over Investment securities backed by mortgage lliana toold create losses In our Investment portfoUo.
Althougb we sold mortgage-backed securities on June 30, 2009 that 100% of our exposure to mortgage-backed securities collateralized by option-adjustilble-rate mortgage
loans, a majority of the Bank's investment portfolio is of secuntle,s where the co!lateral. These securities include agency-guaranteed mortgage-
backed securities and nonagency and collaterahzed mortgage obhgations., Ith nallonal dow?tum real estate markets and the rising mortgage
delinquency and foreclosure rates, mvestors are IDcreasmgly concerned about tbese types of secunlles, whlcb have negallvely Impacted tbe prices of such securities in the
marketplsce,
Continued negative trends in the loans underlying the mortgage-backed securities could lead to material otber-than-temporary impainnent charges in the future. The determination of
other-than-temporary impairment is a significant and is to change If on tbose loans were to exceed the subordinated tranches designed
to credit-enhance our securities, we would not receive the full stated Interest due on the or full pnnclpal balance, or both. Our company and the Bank own both senior and
subordinated tranches of these If we were to were losses wblch were - which we evaluate, by among other factors,
considering estimates ofrecoverabllity, as well as the durallon and seventy of the unreahzed loss - 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 The portion charge due to credit also reduce our regulatory capital and negatively impact the Bank's capital
ratios. Tbese n.egative impacts could Impair the ablhty to funds under c,redlt arrangements, .as well as negatively impact our material institutional depository
arrangements and relationships, In addition, If the Bank It was more hkely than not It. would sell a secUrity, or that it was more likely than not that it would be required to
sell a security, such impairments be, through as other-than-temporary Tem.porary on available for sale securities and the portion of
impairments on held-to-maturity securltiesID which we, Identified as other-than-te.mporary that ,IS not 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 proscnbe capital ratio levels for our company per se, additional impairments could
reduce capitalleve!s 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
characterisiics include, among others, declining real have reduced the. prices of many one-to-four family residences below the amount of the outstanding mortgage
debt, limited underwriting documentation at mortgage orl8mallon which may have permitted borrowers to mortgagors of obligations beyond their economic means, declining
employment in the United States, and otber factors.
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DeeHnes In the credIt aDd resIdential housing markets could result In further losses on our mortgage-hacked securIties.
Credit markets in many sectors have experienced in Ii.quidity and increases in required returns by in credit-1lensitive assets. These conditions began in
2007 ill the sub-prime mortgage market, but expanded 10 2008.t? mclude all non-agency mortgage:b.acked securlltes and many other asset-backed markets. At June 30, 2009,
approximately 18% of our assets were mortgage-backed securllles and apP£?xlmately 92.5% of those securIties non-agency securities. Recent transactions by distressed sellers,
and expectations of further distressed, sales, have exacerbated market dIscounts for mortgage-bac:ked securltJes and generally removed the majority of typical participants from
transactions in non-agency securities. As a result, it is difficult to deteflDine rair 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 by approximately million, or 15.2%, at June 30, 2009. Though we currently have tlJe intent
and ability to hold the securities until repayment, if it became necessary for us to sell non-agency securltJes, 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.
As. regulated entity, tile Baak must maintain certain reqalred levels ofregulatory capItal that may Umlt our operatioas and potential growth.
The Bank is subject to various regulatory capital requirements administered by.the OTS. to meet minimum capital requirements can initiate certain mandatory, and possibly
additional diacretionary actions by regulators that, if undertaken, coul.d a dIrect material effect on Bank:s and consolidated financial statements. Under capital
adequacy guidelines and the regulatory for prompt correctIVe aclton, the must meet speCIfic capItal gUldehnes that IOvolve 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 ade,quacy re.quire tlJe Bank to mainta.in and defined of total and Tier I capital to risk-weighted
'assets and of Tier I capital to total For the Bank, I capItal consIsts of eqUIty .excludm.g unrealized gains and losses on certain securities,less a portion of the
Bank's mortgage servicing asset that IS dIsallowed for capital. For the Bank, total capItal consIsts of TIer I capItal plus the allowance for loan and lease loss less a deduction for low
level recourse obligations. '
Many may affect the Bank's capital and !ts ability to maintain ratios: For loan loan impaiflDents, recognized loan losses, increased
operating expenses and other, factors may combme to the Bank s and require us to contrIbute capItal to the Bank. Conversely, positive operational results,
such as the sale of assets at value in excess of our amortIzed cost, expense savIDgs programs and other factors may mcrease the Bank's capital, thereby improving its regulatory capital
ratios under OTS guidelines.
U any of the Bank's subordlnate-tranche, non-agency, mortgage-haeked securities were to be dowagraded below investmeat gnde by one or more of the natioaally recognized
aeeurilles rating orgaaizatioas, or NRSROs, which rate the securities, we could be required to malntala additional capital.
We hold a number of subord,inate-tranche, non-agency, securities which were rated by one or more NRSROs when the Bank acquired them. If any of these
securities were to be 'downgraded two or more grades. below IDvesllDent anyone N.R:SRO, as below, we will be required to maintain additional risk-based capital in
support of such securities if the Bank elects to contlDue to hold such secuntJes. The, addlllonal 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 io 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 securities or other. .strateg!es to its required capital ratios. These alternatives or other strategies
could negatively affect our results of operallons, cash and finanCIal WIth the distress In the UDlted States mortgage market ensuing since Spring 2008, many of our
subordinate-tranche, non-agency, mortgage-backed secuntles, fOflDerly rated IDvestment grade, have been downgraded to two or more grades below invesllDent grade by one or more
NRSROs.
As of June 30 2009 we held subordinate-tranche, non-agency, mortgage-backed securities with an amortized cost oU138.8 million, cifwhich $90.4 million in amortized costlo us were
rated grade or one grade below invesllDent grade. With regard to the $90.4 million in amortized, cost of subordinate-tranche, non-agency, mortgage-backed securities' we
were required to maintilin regulatory risk-based capital ofS6.2 million to hold securities at June 30, 2009. The remainder of our subordinate-tranche, non-agency,
securities $48.4 million in amortized cost, were rated two or more grades below mves!Jnent grade at June 30, 2009, and the Bank was required to maintain $24.8 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 June 30, 2009, approximately $39.3 millio? of tbe $90.4 mil}ion of subordinate-tranche, non-agency mortgage-backe.d securities were downgraded to two or more grades.
below investment grade by at least one NRSRO. AssumlDg no changes pnor to September 30, 2009, these downgrades would requIre tbe Bank to allocate an estimated $35.4 million of
additional capital to tbese securities iii order to maintain a total risk-based capital ratio of 10% at September 30, 2009. .
We are exploring various alternatives to manage tbe potential impact oftbese ratings downgrades, including, witbout limitation, incurring additional debt ai our company to purcbase
certain securities from tbe Bank, including tbe newly downgraded subordinate-trancbe, non-agency, mortgage-backed securities.
We are unable to predict witb any degree ofaccuracy wben or if any of our remaining subordinate-tranche, non-agency mortgage-backed securities witb an amortized cost of $51.1
million may be downgraded to two or more below grade by any NRSRO. Any additional downgrades by the NRSROs to two or more grades below investment grade
could bave a material adverse effect on our finanCIal condItion.
As a savings bank, pursuaut to the Home Owuen' Loau Act, or HOLA, the Bauk Is required to malutala a certaiB perceBtap of its total a&seta iu HOLA-qua1lfylug loa .. BBd
iuvestmeuta, which limits our asset mix aud could slgalflcaudy restrict our ability to sell certaia assets to obtala liquidity.
A savings bank or tbrift 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, sucb as loans for the
purcbase, refinance, construction, improvement, or repair of residential real estate, home equity loans, educational loans and small business loans. To maintain our tbrift charter we
have to pass tbe Qualified Tbrift Lender test, or QTL test, in 9 out of 12 oftbe immediately preceding montbs. 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 tbe yield on our earning assets by growing our commercial loan portfolio.
In addition, if we continue to grow our commercial loan portfolio and our single-family loan portfo.lio declines, it is possible that in order to maintain our QTL status, we could be forced
to buy mortgage-backed securities or other assets. at times when the terms mlgbt not be attractive. Alternatively, we could find it necessary to pursue different
structures,. including converting the Bank's tbnft charter to a commercIal bank charter.
Our quarterly results may fluctuate.
Our financial results are subject.to significant quarterly fluctuations 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 wholesale assets, such as our single-family mortgage loans, guaranteed SBA loans and pooled securities
and cbanges in interest rates. Our operating results will significantly in tbe future as a result variety off actors, some of which are outside of . our control, including general
economic conditions, economic conditions in tbe financlallDdustry, the of and regulatory changes, capital expenditures and other costs relating to the
expansion of operations, the introduction of new services by us or our compelttors 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 alliapces or make investments that could have a material adverse effect on our business
results of operations, financial condition and cash flow. Accordingly, our results of operations for any particular quarter are not necessarily indicative of the results that may b;
achieved for any succeeding quarter or for the full fiscal year.
If we sell mortgage loans or mortgage servlelag rights and the underlying loan defaults, we may be liable to the purchaser for uupaid 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 tbere has been a breacb of 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 repurchase the and bear any subsequent loss on the loan. When we purchased mortgage
servicing rights or mortgage loans, we also have been exposed to Itablltty to the extent tbat.an seller of the servicing rights is unable to bonor its representations
and wf!ITanties to us. Our company has estabhshed a reserve for repurchases that may be reqUIred ID connection WIth loans we originated and sold in connection with the sale of our
wholesale production platform in 2003. .
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United Western Bankre6es on wholesale funding sources for secondary and contingent Uquidity sources.
The Bank utilizes borrowings from the Federal Home Loan Bank, or FHLBank, system, brokered certificates of deposits and tepurchase for secondary and contingent
sources ofliquidity. 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, in quality or value of.the underlying instruments could reduce our wholesale borrowing capacity. If the Bank
were unable to obtain or maintain our access to fundmg or If adequate fundlOg IS not avatlable to accommodate future growth at acceptable interest rates it would have to find
alternative sources of liquidity, ",hich, if available, would probably be at.a higher cost and on terms that do not match the structure of our liabilities as well a; the existing wholesale
funding sources. In addition, our company relies on wholesale bank company funds. funds were not available from the banking sector, securing alternative
funding could cauSe disroption to. our business. Factors that could detrimentally Impact our to sources. a decr.ease in the level of our business activity as a
result of a downturn in the markets in which our loans are or adverse action agamst us. Our ablhty to borrow could also be impaired by factors that are not
specific tD us, such as a disruption in the. financial markets or negaltve views and expectallons about the prospects for the financial services industry in light Df the recent turmoil faced
by banking organizations and the continued deterioration in credit markets.
At June 30,2009, we had outstanding indebtednellS to FHLBank Topeka the amount of $190 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 NRSRO. If the rating agencies were to downgrade any of the eligible securities
that we have pledged to FHLBank Topeka to an unacceptable .",-ould be reduced br $54.9 million as of June 30, 2009. If FHLBank Topeka reduced our
borrowing capacity, and we were not able to replace the financmg on slmtlar terms, our hquldlty could be materially and adversely affected. It may be difficult to secure replacement
financing in the current credit markets.
Curtailment of goverament guannteed loan programs could affect our SBA business.
The B.ank's small business department relies on originating, and selling government guaranteed in particular those guaranteed by the SBA. From time to
time, the government agencies that guarantee these loans reach their IOternal hmlts and cease to guarantee loans fDr a periDd oftime. InadditiDn, these agenCies may change their rules
for loans. Dr legislation may discontinue or change the prDgrams. If changes occur, the volumes of loans that qualify for government guarantees could decline, which could in tum
reduce the prDfitability ofthe Bank's small business department.
Weare exposed to risk of environmentolliabilties.
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 In addition,. if are the or former owner of a contaminated site, we may be subject to common law claims by third parties
based Dn damages and costs resulting from environmental contammalton emanatlOS from the property.
FaUure in our automated systems and controls could subject us to increaaed operating or otber Uabilities.
We depend heavily upDn our automated systems controls:for our business and These 'systems and support the evaluation, acquisition, monitoring, collection
and administration of our loan and servicing portfohos, ?eposltory, general accountmg and, other management functions, as well as the brokerage functions we perform. The failure of
the automated systems, including a failure of data integrity or accuracy, cDuld 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 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-lOS and other disruptions would jeopardize the security of information stored in and
transmitted through our computer systems and n.etwork which may result in to us and deter potential customers. Although we, with the help of third-
party service providers, intend to continue to Implement secunty technology and estabhsh 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 Dn our financial condition and results of operations. _
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Breaches of our computer gild lIetwork security systems may result ill 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
sale or disclosure of the information to third parties, credit fraud or other consequ.ences 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.
We may be adversely affected by changes in laws and regulations and the regulatory environment.
In June 2009, the U.S. Department of t h ~ Treasury, or Treasury, issued a "white paper" containing rederallegislative proposals that, if enacted into law, would make substantial changes
to the present U.S. financial services regulatory framework. One legislative proposal would be to eliminate theOTS and the. federal savings bank or "thrift" charter, subject to
"reasonable transition arrangements." One of these transition arrangements might involve, on a. going-forward basis, converting the federal thrift charter into a national 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. As o.r the da.te of this Quarterly Report on Form l ~ - Q , the legislative proposals contained in the Treasury white paper,
including its proposal to eliminate the federal thrift charter are bemg considered by the U.S. House of Represental1ves and the U.S. Senate. However, it is not clear whether the proposal
to eliminate the federal thrift charter will become law, and if such proposal does become law, how the Bank would be regulated and supervised. If Congress eliminates the OTS and the
Bank is required to convert its charter to a national bank charter, our company would no longer be regulated by the OTS, and it is possible we would be regulated by the Federal
Reserve as a bank holding company.
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 regulatory authorities have extensive discretion in the exercise of their supervisory and enforcement powers. They
may, among other things, impose restrictions on the operation of a banking institution, the classification of assets by such institution and such institution's allowance for credit
losses. 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 condition 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 termination 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.
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 trade practices act. These laws also permit private individual and class action lawsuits and provide for the recovery of
attorneys fees in certain instances.
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If our application for proceeds under the Treasury's Capital Program, or CPP, accepted and we elect to participate, we will be required to enter into agreements with the
Treasury that the Treasury may amend for any reason at any lime. We' are unable to predIct the scope or extent of any future amendments that Treasury may mandate under its CPP
documents, all or some of which may impose additional regulatory burdens on us. Further, in order to accept CPP proceeds, we will be required to enter into a "source of strength"
agreement with the OTS that will require us, as and by the OTS, to financial managerial to'the Bank. There can be no. assurance that we will be able
to supply the support requested by the OTS due to hmltatlons on our own finanCIal andmanagertal resources at the lime of such request and our fadure to provide the requested
support may lead to regulatory enforcement action or actions against us and the Bank by the No assurance can be given that the foregoing regulations and supervision will not
change so as to affect us adversely. '
If our company were to suffer loan losses slmDar In a_unts to those that may be predleted by a SCAP test, 'tlley could lIave a material adverse effect on onr results of operadon or
flnanelal condldon, and the prlee, and market for, our common stock, and could require tile need for additional capitaL
Bank regulatory authorities, in connection with the Supervisory Capital Assessment Program, or SCAP, recently administered a stress or SCAP test to the natioli's 19 largest
banks. The SCAP test is based' on a 2-year cumulative loan loss assumption that represents two scenarios, a "baseline" scenario that assumed a consensus forecast for certain
economic variables and a "more adverse" than expected scenario to project a more significant downturn. These scenarios are 'not forecasts or projections of expected loan losses.
While bank regulatory authorities have not administered a SCAP to our loa.n portfolio (both held for investment and loans held for sale), we, in conjunction with a
consultant, performed a stress test of our loan portfolio to determlDe the potentIal effects on our capItal as a result of the persistence of the ec,onomic factors identified in the SCAP test
and to assess the potential exposure for increased nonperforming assets. The analysis was designed to approximate the SCAP test, with specific adjustments based on more current
economic data reflective of the market areas in which our loans are located. ' ,
'If the results of SCAP test were to be applied to our loan portfolio, the estimated cumulative loan losses over the next six quarters ending Decemher 31, 2010 under the "baseline"
scenario may be $13.5 million, and under the "more adverse" scenario may be $19.1 These scenarios do not take into account our existing allowance for loan losses or existing
.lower of cost 9r fair value write downs which exceed these amounts. Jl!evertheless, we to suffer loan losses similar in amounts to those that may he predicted by a
SCAP test, they could have an adverse effect on our results of operallon or finanCIal condillon, ,and the prIce, and market for, our common stock, and could require the need for
additional capital.
UW Trust Company Is subject to reguladon as a trust company and could be the 'Subject of tblrd party aedons.
As a Texas chartered trust company, UW Trust is subject to and examination by the Texas Department of Banking. 'uw Trust's activities are limited by
applicable law generally to acting as a trustee, executor, admlDlstrator, guardian or agent for the performance of any lawful act, and to accumulate money when authorized under
, " ,
UW Trust has been in the past, and may be in the future, subject to claims by third parties 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 thereof, in thilt regard, there can be no assurances that we will prevail in any litigation or
other proceeding challenging the matter.
Our ability to service onr debt and pay dividends Is subject to our ahlllty to receive dividends from our subsidiaries.
We are a separate legal entity from our subsidiaries and do not have signifi.cant operations of our. own. We currently depend on our cash, mortgage-backed securities, credit facilities
and liquidity as well as dividends from subsidiarie.s to pay our and semce o.ur no assurance that our subsidiaries will continue to have the
capacity to pay us the necessary ,t? sallsfy our obhgatlons. In avatlablhty, of dIVidends from the Bank is limited by various statutes and
regulations. Depending upon the condItIon of the Bank and. factors, It IS the OTS .could that the of dividends or other payments by the
,Bank are an unsafe or unsound practice. If the Bank or our other subsldtartes are unable to pay dIVIdends suffiCient to satisfy our obhgahons, we may not be able to service our debt,
pay our obligations as they become due or pay dividends on our common stock. '
Significant legul acdons could subject our company to substantial UabUides.
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 substantial liabilities, which could adversely affect our results of operations and
financial condition.
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Risks Related to our Business Strategy
We may be unable to wily Implement our commualty bankla\! business strategy.
We are 42 montbs into our community bank transition, and in order to complete tbe execution of this strategy we must, among other things:
attract sufficient commercial business and retail deposits;
attract and maintain business banking relationships with businesses in the markets in which we serve;
attract and retain experienced and suceesstiJI commercial and community bankers:
identifY and pursue suitable opportunities for opening new branches in the Colorsdo Front Range and selected mountain community markets:
maintain adequate regulatory capital and comply with applicable federal and state regulations; and
originate community' bank loans and maintain adequate asset quality.,
Failure to achieve tbese 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 maDage our proposed growtII.
Our business strategy contemplates, in part, an increase in our franchise value by expanding inio additional communities in the Colorado Front Range and selected mountain
communities through a brancb network for Bank. To the we branch we are .Iikely to experience the effects of higher operating expenses
relative to operating income from our expanslo.n efforts for a of We IDtend to make loan office m Aspen, .Colorado a full-service brancb, and we may acquire
or lease other sites for future expansion. Whtle 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 lines. of business. or pursue other strategies to complement our community banking business plan implementation. To the extent we
undertake sucb actions, we may expenence hIgher operatmg costs and these new acllvllles may not be successful.
We may not be able to attract and retain key personnel.
Our business strategy requires 'us to attrac! and to re.tain management in banking and financial who .live in the communities we serve. Our ability to
r,etain our existing executive officers, and bankmg staff IS Important to the of our strategy. The unexpected loss of key
personnel or the inability to recruit and retam quahfied, personnel m the future could have an adverse effect on our busmess.
Adverse econoiDlc condldonsln the Colorado Front Range and our mountain community markets could impair the execution of our business strategy. '
Tbe success of our business strategy depends primarily on tbe general economic conditions in our markets because local economic conditions will materially affect commercial real
eS,tate, including construction and land development, and residential loans originated, the ability of the borrowers to repay these toans and the value of the collateral securing these
loans.
Our possible participation In the T ARP CPP may place slgnifleaDt restrietlons on our operations.
Under tbe Troubled Asset Relief Program's, or TARP, CPP, in the event that the Treasury approves pending CPP application and we elect to participate in CPP, our ability to declare
or pay dividends on any of our sbares is limited. Specifically, we would not be permitted pay on our .without the Treasury's approval unless all of the
preferred stock issued under CPP has been redeemed or transferred by the to unaffiltated thIrd partIes. In addltton, our ablhty to repurchase shares of our common stock and
other securities would be restricted. The consent the Treasury IS reqUIred us to make any stock than in connection with the administration of any
employee benefit plan in the ordinary course of bus mess and consIstent WIth past pracltce), unless all shares of preferred stock have been redeemed or transferred
by the Treasury to unaffiliated third parties. Further, we may not repurchase shares of our common stock If we are m arrears on tbe payment of preferred stock dividends.
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In the event our application is accepted and ,,\,e elect to participate in the TARP CPP, we would also be subject to the Treasury's current standards for executive compensation and
cOlpOrate governance for the period during which we bave any outstanding obligation to Treasury, or the TARP Period. On Iune 10,2009, Treasury, under the Emergency Economic
Stabilization Act of2008, or EESA, as amended by the American Recovery and Reinvestment Act of2009, or ARRA, issued an interim final rule establishing these current standards.
These current standards generally would apply to our named executive officera (i.e., our Chief Executive Officer, Cbief Financial Officer and our three next most highly compensnted
senior executive officers). In addition, under certain circumstances, these standards would apply to our most higbly compensated employees, even if they are not our named executive
officers. Under tbe current standards: '
we would be required to ensure that any bonus payment made to our named executive officers or our next 20 most highly compensated employees is subject to a
contractual provision for recovery or "clawback" by us if the bonus payment was based on materially inaccurate financial statements (which includes, but is not limited to
statements flf earnings, revenues, or gains) or any other materially inaccurate performance metric criteria; ,
we would be prohibited from making any "golden parachute par.ment" (Le., any payment for the departure from our company for any reason, or any payment due to a
cbange in control of our company, except for payments for servIceS performed or benefits accrued) to a named executive officer and any of our next five most highly
compensated employees; ,
we would be prohibited from paying or accruing any bonus, retention award or incentive compensation to at least five of our most highly compensated employees
than long-term restricted stock or stock units, as long as the value of the. restricted stock or units is no greater tban one-third of tbe affected employee's annual
compensation and tbe award does not fully vest until the end of the TARP Penod);
we would be required to establish a company-wide policy regarding "excessive or luxury" expenditures;
we would be probibited from providing tax gross-ups to any of our named executive officers and our next 20 most highly compensated employees;
we would be required to include: in any proxy statement for any annual or other meeting of our shareholders a separate non-binding shareholder vote to approve the
compensation of our named executive officers;
we would be required to maintain compensation plans tbat do not contain features that (i) unnecessarily expose our company to risks, (ii) encourage our named executive
officers to take unnecessary and excessive risks that threaten the value, of our company or (iii) encourage the manipulation of our reported earnings; and
. we would not be able to claim a deduction, for federal income tax pUlpOses, for compensation paid to any of the named executive officers in excess of $500,000 per year.
The change to the deductibility limit on executive compensation may increase the overall cost of our compensation programs in future periods.
Our compensation committee would be responsible for monitoring and evaluating with these standards. Our compensation committee would 'be required to provide
certifications as to our compliance with these standards in the annual proxy statement wlthtn days of the end of each fiscal year during the TARP Period, while our Chief Executive
Officer and Chief Financial Officer would bave to do so in the Annual Report on Form 10-K Wlthtn 90 days of the end of each fiscal year during the T ARP Period.
Tbe restrictions on bonuses and incentive compensation cited above (as well as any future ones) may ,result in us issuing additional shares of our stock to compensate our
executive officers that likely would result in dilution to our common sbareholders and could have an adverse impact on the market value of our common stock.
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RIsks Relatlag to the OWnership of Our Commou Stock
The tndlng volume of our stock Is 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 June 30, 2009, based on filings made by third parties with the Securities and Exchange Commission, we believe
that six holders owned 52.9% of our outstanding common stock. This includes shares held by our Chairman of the Board, Guy A. Gibson, who owns 1,325,985 shares, Dr 18.1 % of our
outstanding common stock. .
We may Issue additional shares of common or preferred stOck, which may eauae dUutlon and other risks.
Our board of directors may authorize. the issuance of additional common Dr preferred stock in connection with future equity offerings, acquisitions of securities or assets of other
companies or to be used as compensation for our executive officers. Furthermore. there are significant implementation risks associated with the acquisition 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 reclassify any unissued preferred stock and set
the preferences, rights and other terms of the classified or shares, 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 purchas,,· our common stock it! 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.
Preferred shares that we would Issue If we participated In the CPP will Impaet net Income available to holden of our common shares and earnings per common share, aud the related
warrant to be Issued to the U.s. Treasury may be dlludve to holders of our common shares.
As disclosed above, we have applied for an investment by the Treasury under the T ARP CPP pursuant to the RESA, as amended. If the Treasury agrees to make such investment in us
and we elect to participate in tbe CPP, the terms of sucb investment will include the issuance of senior preferred stock coupled with 15% warrant coverage. While tbe additional capital
we may raise through our possible participation in the CPP will provide further funding to our busin"ss, and we believe will improve investor perceptions witb regard to our financial
position, it will increase our equity and the of actual and outstanding as well as our preferred stock dividend requirements. Tbe dividends declared and
the accretion of discount on the preferred stock Issued to Treasury will reduce the net IDcome available to bolders of our common shares and our earnings per common share. The
preferred shares will also receive preferential treatment in event our or up .. Additionally, the ownership of tbe existing holders of our
common shares will be diluted to the extent tbe warrant we WIll be reqUIred to Issue to the Treasury ID conjunction WIth the sale of the preferred shares IS exercised. Because tbe number
of common shares available to the Treasury under the warrant is not determined until tbe final. closing, we are unable to currently determine the number of common shares we will have
to make available to the Treasury under the warrant. Althougb the Treasury has agreed not to vote any of tbe common shares it receives upon exercise of the warrant, a transferee of
any portion of the warrant or ofany common shares acquired upon exercise ofthe warrant is not bound by this restriction. .
The market price of our common stock may 8uetaate slgnHleantly.
The market price and liquidity oftbe market for shares of our stock may be s.ignificantly affected by numerous including some that are beyond our control and tbat may
not be directly related to our operating performance. These factors mclude the followlDg: .
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 additionill debt;
and
changes in general economic and market conditions.
-75-
2233
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting of Shareholders beld on May 22, 2009, shareholders voted on the following matters:
(I) To elect three director nominees to serve until the Annual Meeting of Shareholders for the year shown. Each director nominee was elected.
Name of Nominee
:BewardC. Darn;.
Lester Ravitz

Total Votes For
4,598;569
4;597;048

Other directors whose term of office as a director continued after the meeting were as follows:
Name
Scot T; Wet.ze1.
William D. Snider

Guy A. Gibson
James It Bullock
Michael J: McCioskey'
Total Votes Withheld
... 1,758,173
.,'. ..
);76M?3 .•
To serve until
the Annual Meeting
of Shareholders
··2012.
'2012
'2()Q'
(2) To ratify the appointment by the Audit Committee of the Board of Directors of Crowe Horwath, LLP as the Company's independent registered public accounting firm for the
2009 calendar year. .
Toti.! V61esFor
Total Votes Against
TotalAbsteiitions
-76 -
2234
ii,348,()96
.. . 568
8,061/ .
Item S. Other Inflirmatloo
None.
Item 6. Exhlhlts
(a) Exhibits
31.1 Rule 13a-14(a) Of Rule lSd-14(a)llSd-14(a) Certification of Scot T. Wetzel
31.2 Rule 13a-l4(a) Of Rule lSd-l4(a)llSd-l4(a) Certification of William D. Snider
31.3 Rule 13a-l4{a) or Rule I Sd-14(a)/lSd-l4(a) Certification of Benjamin C. Hirsh
32.1 Section 1350 Certification of Scot T. Wetzel
32.2 Section 1350 Certification of William D. Snider
32.3 Section 13S0 Certification of Benjamin C. Hirsh
-77 -
2235
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Dated:
August 7, 2009
Dated:
August 7, 2009
Dated:
August 7, 2009
- 78-
2236
UNITED WESTERN BANCORP,INC.
lsi Scot T. Wetzel
ScotT. 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
Beqiamin C. Hirsh
Chief Accounting Officer
(Principal Accounting Officer)
INDEX TO EXlDBITS
EXhibit
Description
c
31.1 Rule 13a-l4(a) or Rule 15d-14(a)/15d-14(a) Certification of Scot T. Wetzel
31.2 Rule 13a-l4(a)or Rule 15d-14(a)/15d-l4(a) Certification ofW'il1iam D. Snider
3\j Rule 13a-14(a) or Rule 15d-14(a)/15d-14(a) Certificatioo of Benjamin C. Hirsh
32.1 Section 1350 Certification of Scot T. Wetzel
32.2 Section 1350 Certification of William D. Snider.
32.3 Section 1350 Certification of Benjamin C. Hirsh
-79-
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Section 2: EX-31.1 (CEO CERTIFICATION)
Exhibit 31.1 •
CERTIFICATION
I, Scot T. Wetzel, President and Chief Executive Officer of United Western Bancolp, Inc, (the "Registrant"), certify that:
1. I have reviewed this report on Form 10-Q of United Western Bancolp, 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 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 inc!uded 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 ID thiS report; ,
4. The Registrant's other certifying officers and lare responsible for establishing and maintaining disclosure controls and (as defined in Exchange A-ct Rules 13a-15(e)
and 15d-15(e» for the Registrantand 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 is being prepared;
b. designed such internal conn:ol over fi?an.c!&1 reporting. or such internal cont.rol over reporting to be designed our supervision, to provide
reasonable assurance regardlDg the rehablhty of finanCial reportlDg and the preparallon of finanCial statements for external pUlposes ID accordance with generally
accepted accounting principles;
c. evaluated the effectiveness of the Registrant's. disclosure controls and pro<;edures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as ofthe 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
1. The Registrant's other certifying officers and I disclosed, based on our most recent evaluation ofinterna:l 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. W.etzel
Scot T. Wetzel
President and Chief Executive Officer
(Principal Executive Officer) ,
August 7,2009
Section 3: EX-31.2 (CFO CERTIFICATION)
2237
Exhibit 31.%
CERTlFlCAnON
I, William D. Snider, Chief Financial Officer of United Western Bancorp, Inc. (the "Registrant"), certify that:
1. I have reviewed this report on Fonn IO-Q 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 statementa made, In light of
the circumstimces 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 infonnation 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 presenle\i 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 13a-15(e)
and lSd-I 5( e» 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 is 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
materisllyaffected, or is reasonably likely to materially affect, the registrant's intemal 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 fimmcial reporting, to the Registrant's auditors and
the audit committee of the Registrant's Board of Directors: . .
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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 infonnation; and .
b. any fraud, whether or not materia:t, that involves management or other employees who have a significant role in the Registrant's intemal controls over financial
reporting. .
lsi William D. Snider
William D. Snider
Chief Financial Officer
(Principal Financial Officer)
August 7, 2009
Section 4: EX-31.3 (CAO CERTIFICATION)
Exhibit 31.3
CERTIFICATION
1, Benjamin C. Hirsh, Chief Accounting Officer of United Western Bancorp, Inc. (the "Registrant"), certify that:·
1. I have reviewed this report on Form IO-Q ofUriited Western Bancorp, Inc.;
2. Based on my knowledge, this report does not contain any unime statement of a material fact or omit to state a 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 infonnation included in this report, fairly present in all material respects the financial condition, results of
operations and cash flows ofthe 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 13a-15(e)
and 15d-15(e» 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 is 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 extemal 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 ofthe 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
1. 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: '
2238
(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)
August 7, 2009
Section s: EX-32.1 (CEO 906 CERTIFICATION)
Elhlbit3U
CERTIFICATION PURSUANT TO •
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 9G6 OF THE SARBANES-OXLEY ACT OF 1001
In connection with the Quarterly Report of United Western Bancorp, (the Form 1O-Q for the quarter ended lune30, 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 1 g U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Satbanes-Oxley Act of 2002, 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
2. The information contsined in the report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: August 7, 2009
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lsi Scot T. Wetzel
Scot T. Wetzel
President and Chief Executive Officer
(principal Executive Officer)
Section 6: EX-32.2 (CFO 906 CERTIFICATION)
Exhlbit3U
CERTIFlCATION PURSUANT TO
18 U.s.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 1001
In connection with the Quarterly Report of United Western Bancorp, mc. (the "Company") on Form 1O-Q for the quarter ended June 30, 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 18 U .S.C. Section 1350, as adopted pursunnt to
Section 906 of the Sarbanes-Oxiey 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
2. The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: August 7, 2009
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2239
lsi William D. Snider
William D. Snider
Chief Financial Officer
(principal Financial Officer) .
Section 7: EX-32.3 (CAO 906 CERTIFICATION)
ElIblbit 31.3
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 1001
In connection with tbe Quarterly Report of United Western Bancorp, Inc. (tbe "Company") on Form IO-Q for tbe quarter ended June 30, 2009, as flied with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Benjamin C. Hirsh, Chief Accounting 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:
1. The report fully complies with the requirements of Section \3(a) or IS(d) of the Securities and Exchange Act of 1934; and
2. The information contained in tbe report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: August 7, 2009
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lsI Benjamin C. Hirsh
Benjamin C •. Hirsb
Cbief Accounting Officer
(Principal Accounting Officer)
2240
TabC
Exhibit 83
2241