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Fellow Shareholders:

In our Q2 update, I shared some highlights of our progress and performance in 2012, and through the second quarter of 2013.  This update includes the latest on our further progress through September as well as details on our Q3 financial performance in a summary prepared by our Chief Financial Officer, Julie Courkamp, and an investment update from Warren.

This is the time of year we work with the Board and our profit center, product group and support center leaders on our plans for 2014 – which is definitely now all about our return to “playing offense”.   As previously mentioned, our big theme for 2013 was focused on getting First Western back into this position after the 5 years of stiff economic, financial and regulatory headwinds.  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 now in a position where we can shift back onto offense.

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 to tangible book, to more discounted cash flow and earnings based multiples.  While our mature offices have been consistently very profitable – with contribution margins exceeding 60% – overall profitability of the Bank and the consolidated company have improved nicely.

We have launched a number of earnings initiatives over the past 15 months, which are delivering much better earnings for five consecutive quarters now.  Here are the year over year, year to date pretax earnings results:

$ in mm

YTD   Sept. 30, 2012

YTD   Sept 30, 2013


FWFI Consolidated




FW Trust Bank




FW Capital Management




We had strong earnings in October at both the Bank and Consolidated levels, and we expect profitability in each of these entities to continue through year end.  Further earnings gains in 2014 will come from our return to historic organic growth and expansion activities, driving successful revenue growth, discussed below.

Capital – As I have previously noted, the regulatory trend for banks continues to be to encourage higher capital ratios, with a big focus on “high quality” capital (i.e. common stock).  Regulator attitudes, together with ongoing Dodd Frank and Basel III implementation, are underscoring this trend.  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 will be held to even higher capital standards.  We set as a target for this year to boost our ratios to ratios 200 basis points above “well capitalized”, and we have exceeded those targets.

First Western Trust



Risk Based Capital Ratio



Tier 1 RBC Ratio



Leverage Ratio



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

Asset quality – As you know, First Western has traditionally had excellent asset quality.  As I described last quarter, we are now completing our digestion of our group of Great Recession problem loans – the “pig in the python”.  Our classified asset to capital ratio, which peaked 15 months ago at 71%, finished the quarter at 33% and should be about 20% by year end.  This recovery back toward our historical very low level of classified assets brings 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:

  • Consolidated revenues of $11.9mm in Q3 are up 7% from a year ago and 22% from the prior quarter;
  • Year to date revenues at the Bank are up 15%, from $23.8mm to $27.3mm year over year; and,
  • Consolidated trust and investment assets are up to $4.7 billion at September 30 from $4.0 billion at year end and $3.9 billion a year ago.

After four consecutive quarters of shrinking our loan portfolio, due to client deleveraging and unattractive loan growth opportunities, we posted net growth in our loan portfolio in Q3.  Consolidated assets in Q3 were also up 10% in the quarter to $682mm.

Summary – As you can see from this update, we have made great progress in the first three quarters 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.  This progress positions us for exciting things to come in 2014.

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.