Spokane-based AmericanWest Bank, resuscitated two years ago after a near-death experience, appears to be recovering rapidly under the care of new management that has reduced its problem assets and used a big pile of investor cash to expand the institution and its services.
The bank recently reported net income of $74.2 million for 2012, up dramatically from $16.3 million in 2011, and said it had organic loan growthseparate from that created through acquisitionsof more than 10 percent.
Also importantly, it learned two weeks ago that holders of a majority of Medford, Ore.-based PremierWest Bank had voted to approve a proposed merger of the two companies in a sizable transaction.
That acquisition, which regulators already had authorized, will be second largest of seven acquisitions thus far under AmericanWest's holding company, SKBHC Holdings LLC, trailing only its purchase of AmericanWest itself through a wholly owned subsidiary.
Once it's completed, which bank representatives said earlier this month was expected to happen shortly, AmericanWest will have grown its assets to about $4 billion, up from $1.6 billion in January 2011, as it seeks to carve out its own market segment as a business-focused community bank.
Also, it will have deployed about $460 million of the $750 million in funding commitments it received early on from major private equity investors, as well as public- and private-pension funds. An earlier established period during which AmericanWest was to invest all of its infused capital had been scheduled to conclude next month. However, investors have granted it an extension until May 2015 to acquire additional institutions and fill in gaps in its desired geographical service area, says Scott A. Kisting, its chairman, president, and CEO.
"I think we have a really good story, because we come into the market with the capital to turn things around," Kisting says, adding, "When we make an acquisition, it's good news for the employees of that institution."
Of the progress AmericanWest has made thus far in implementing its recovery and growth strategy, he says, "I thought we maybe would do some bigger acquisitions earlier." Overall, though, he says, "I feel like we almost couldn't have done more than we've accomplished in two years and three months."
The 39-year-old AmericanWest, which has its headquarters at 41 W. Riverside, offers commercial and small-business banking, mortgage lending, and expanded treasury management services, as well as a full range of personal banking services and products. It currently operates 80 branches in Washington, Idaho, Utah, and California, and it had a full-time equivalent workforce of just under 800 as of the end of last year.
The acquisition of PremierWest will give it a couple of hundred more employees and 32 more branches, in Oregon and northern California. That bank's territory stretches from south of Eugene, Ore., to south of Sacramento, Calif., and east to the central Oregon communities of Klamath Falls, Bend, and Redmond.
Last year, along with announcing the tentative PremierWest agreement, AmericanWest acquired Security Business Bank, of San Diego, and Inland Community Bank, of Ontario, Calif., and opened a new branch in downtown Seattle on the street level of a building at 1202 Second. It already was leasing administrative office space on the building's 15th floor.
It first entered the Seattle market in 2011 with the acquisition of the Bank of the Northwest and Viking Bank. It now operates 11 branches in the Puget Sound area. That same year, it also acquired Sunrise Bank, of San Diego.
"We're in some markets that we really like," Kisting says, citing the Salt Lake City metropolitan area as another example.
What AmericanWest expects to do with its remaining investment capital over the next two years, he says, is add branches to fill in areas such as between Tacoma and Portland; a similar urban corridor between Salt Lake and Ogden, Utah; around the San Francisco Bay Area; and in Orange County and parts of Los Angeles County.
"If we could fill out those areas, we would have some of the best economic markets for banking in the United States," Kisting asserts, adding, "Given where the economic recovery is, we'd like to make acquisitions sooner rather than later."
In a regulatory filing with the Federal Deposit Insurance Corp., along with a jump in net income, AmericanWest also showed strong growth in loans, deposits, and assets last year.
It had total net loans and leases of $1.71 billion as of Dec. 31, up 27 percent from $1.34 billion a year earlier, according to the FDIC data. The bank's total deposits showed a smaller but still substantial gain, climbing 15 percent to $2.18 billion at the end of last year from $1.89 billion at the end of 2011. Meanwhile, its total assets jumped 20 percent to $2.73 billion as of Dec. 31, up from $2.27 billion a year earlier.
Kisting says the jump in earnings was deceivingly high because it included a deferred tax asset, reducing the bank's income tax expense, stemming from net loss carryovers of a couple of the institutions it acquired.
"We were very profitable on a normalized basis, but since we made a lot of acquisitions, there were a lot of additional costs. On a normalized basis, we had a very good year," he says,
The bank's return on assets, a key indicator of its financial health, was 3.09 percent at the end of last year, up from 0.91 percent at the end of 2011, and its return on equity was 19.01 percent, up from 6.39 percent, but those figures, too, were skewed by the flurry of acquisitions, Kisting says.
What perhaps was most important overall, he says, is that "we made good progress."
The bank has trimmed deposit costs, and by putting an intense focus on resolving problem assets, it has avoided having to tap reserves to the extent it thought might be necessary, creating tens of millions of dollars' worth of benefit and thus uncovering a lot of hidden value in its balance sheet, Kisting says.
"This has become a core skill set" for AmericanWest as it works internally throughout the expansion effort to expand profitability, he adds.
Kisting and bank spokeswoman Kelly McPhee describe the bank as not having grown fully yet into its own expanding skin, given the depth of financial talent and breadth of services it has added, which they suggest would be more common to a larger institution.
"What we've done is we've scaled what we think would be a bigger bank," with the goal of having senior credit specialists in every market, and personnel and products that are as sophisticated as those offered by larger competitors, Kisting says.
Unlike most community banks, which put a heavy emphasis on commercial real estate, AmericanWest is looking to build a more diversified balance sheet that's less exposed to the fluctuations of the real estate market, he says.
Kisting heaps much of the praise for the bank's rapid turnaround on its "legacy" employees who were there during its darkest hours, when it was "technically out of business," and who he says have pitched in mightily to help restore it to good health.
"I could not be more proud of our employees and what they accomplished," he says.
As those familiar with AmericanWest's history are well aware, this isn't the first time it has embarked on an ambitious expansion strategy. Robert M. Daugherty, former president and CEO there, led the charge in an earlier such effort and said in 2005, a year after joining the bank, that, "We would like to become the acquirer of choice."
Daugherty was gone three years later, though, after the bank began reporting sizable losses amid the sharp downturn in the nation's real estate market.
What's different this time is that the investors who now own AmericanWest have much deeper pockets. The bank was acquired Dec. 20, 2010, by a wholly owned subsidiary of SKBHC, a California company set up specifically to buy troubled community banks and of which Kisting also is chairman and CEO.
AmericanWest, which had struggled for the previous couple of years under heavy loan losses and a mandate by federal regulators to boost its capital, received a $185 million capital injection from SKBHC as part of the acquisition, restoring it to "well-capitalized" status. Along with the big capital infusion, the transaction involved SKBHC buying all outstanding shares of the bank from the former holding company, AmericanWest Bancorp., for $6.5 million.
Far more significant, though, was the huge sum of investment money SKBHC was authorized to deploy to rejuvenate and expand the bank. Kisting led the formation of that company in 2009. Its backers include Oaktree Capital Management LP, a Los Angeles-based global investment management group; Goldman Sachs Capital, the private-equity arm of the big New York-based Goldman Sachs investment banking and securities firm; and Friedman Fleischer & Lowe, a private equity group based in San Francisco.
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