AmericanWest Bancorp., of Spokane, says it expects its regulatory capital ratios and those of its main operating subsidiary, AmericanWest Bank, to improve significantly as the result of a new law that extends the federal income tax carryback period for net operating losses to five years from two years in certain circumstances.
In a filing with the U.S. Securities and Exchange Commission on Nov. 13, it said it has determined it's eligible to recover $13.7 million of prior tax payments made back to 2003 under the rules, signed into law on Nov. 6.
"The company expects that it will record an income tax receivable and income tax benefit for this amount, and file the related amended federal income tax returns, during the fourth quarter of 2009," it said in the filing.
That tax benefit, it said, will enable it to show improvement in three capital ratios that regulators use to ensure banks can absorb a reasonable level of losses before becoming insolvent. Those ratios are: total capital to risk-weighted assets, tier 1or corecapital to risk-weighted assets, and leverage capital: tier 1 capital to average assets.
AmericanWest projected that the bank's ratio of total capital to its risk-weighted assets, or credit exposure, will increase from 5.7 percent as of Sept. 30 to 6.5 percent, once adjusted. That adjusted ratio, though, still is below the 8 percent threshold for being considered adequately capitalized and the 10 percent needed to be considered well capitalized.
AmericanWest estimated that the bank's tier 1 capital ratios will increase from 4.4 percent to 5.3 percent. In that benchmark, the bank's previous and adjusted ratios exceed the 4 percent regulatory threshold for being considered adequately capitalized, but its adjusted ratio still falls below the 6 percent ratio needed to be considered well capitalized.
Similarly, the bank holding company projected that the bank's leverage-capital ratios will increase from 3.9 percent to 4.6 percent. In that category, the adjustment would put the bank well above the 4 percent threshold for being considered adequately capitalized, but not quite to the 5 percent needed to be well capitalized.
A tax carryback allows for part of a net loss or an unused credit in a given year to be apportioned over preceding years to ease a tax burden. Institutions that had accepted money through the federal Troubled Asset Relief Program weren't eligible for the recently authorized carryback extension, even if they already had paid back those funds, an AmericanWest spokeswoman says. AmericanWest initially applied for TARP funding, then withdrew its application, partly because it couldn't complete a required private-equity co-investment in time.
Through the first three quarters of this year, AmericanWest reported a net loss of $53.5 million, or $3.11 a share, although that was down sharply from a net loss of $134.7 million, or $7.82 a share, for the first nine months of 2008. The company reported a third-quarter net loss of $28.4 million, but said improved liquidity, lower net charge-offs, and its smallest loan-loss provision in two years demonstrate that it's making progress on a number of fronts.
One other area of concern for AmericanWest, though, has been the dwindling price of its stock. It said in September that it had received notice that the minimum bid price of its common stock had fallen below $1 a share for 30 consecutive days, putting it out of compliance with Nasdaq rules. The company said it could regain compliance if its stock closes at $1 a share or higher for at least 20 consecutive business days by March 15, or Nasdaq could tell the company in a subsequent compliance period that its stock was subject to delisting. Its share price has continued to weaken gradually over the last two months and last week was hovering below 40 cents a share.
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