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Fellow Shareholders:

In our Q1 update, I shared some highlights of our progress and performance in 2012 and through the first quarter of 2013.  This newsletter includes an update on that progress, our Q2 financial performance in a summary prepared by our Senior Financial Officer, Julie Courkamp, and a more forward-looking view of some of the things we hope to accomplish still this year.

Our big theme for 2013 was focused on getting First Western back in a position to be “playing offense.”  In the aftermath of the Great Recession, our earnings, capital, asset quality and revenue growth trends were below our historic performance and targets.  We have been working to address each of these areas, and we are making significant progress.

Here is a summary of each of these four areas of focus:

Earnings – As the banking sector has recovered, valuations seem to be shifting now from their reliance on (low) multiples and tangible book to more discounted cash flow and earnings based multiples.  We know that our mature offices can be very profitable – with contribution margins exceeding 60% – but overall the profitability of the Bank and the consolidated company needed to improve.

While larger earnings improvements depend on the high operating leverage we have historically achieved with organic and M&A-driven expansion, we did launch a number of earnings initiatives over the past 12 months, which are showing good results:

$ in mm

YTD   June 30, 2012

YTD   June 30, 2013


FWFI Consolidated




FW Trust Bank




FW Capital Management




We had strong earnings in July at both the Bank and Consolidated levels, and we expect profitability in each of these entities to improve through year end.

Capital – Clearly the regulatory trend for banks has recently been, and will continue to be, to encourage higher capital ratios.  While we have consistently operated the Bank at capital ratios above the top “well capitalized” regulatory standard, it is clear that banks that want to grow and expand need even higher capital ratios.  We set as a target for this year to boost our ratios to ratios 200 basis points above “well capitalized,” and we have achieved those higher levels already.

First Western Trust





Risk Based Capital Ratio





Tier 1 RBC Ratio





Leverage Ratio





These higher capital levels should give us more capacity to grow this year and provide additional flexibility as we look to expand.

Asset quality – As you would expect, First Western has traditionally had excellent asset quality.  Two years ago, a group of pre-recession borrowers began showing signs of stress and working those credits through the workout process has been a rather painful experience.  Today, non-performing loans are down from 5.22% of total loans a year ago to 2.80%, with continued improvements anticipated in the short term.   Our digestion of these problem loans – the “pig in the python” – seems to be concluding, with expected savings in legal and operating costs, as well as a renewed focus on growing our loan portfolio judiciously.

Revenue Growth – With a number of revenue initiatives underway for 2013, we are having some favorable results to date:

  • Net interest income after provision at the Bank improved in Q2, at $5.3mm for the quarter, up from $3.4mm a year ago and $5.0mm in Q1;
  • Non-interest income at the Bank was up to $3.3mm in Q2, up 10% from a year ago but down from $3.5mm in Q1;
  • Consolidated trust and investment assets are up to $4.5 billion at June 30 (and $4.8 billion July 31) from $4.0 billion at year end and $3.9 billion a year ago.

As you can see from this update, we have made great progress in the first half of the year on getting First Western back to playing offense.  Our earnings, capital, asset quality and revenue growth trends are very strong, and we expect further improvements in the months to come.

If you would like more information or have any questions, please just give me a call at 303-531-8101 or email me at  Thanks again for all your support.