United States
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q (Mark One)
(X) Quarterly report under Section 13 or 15 (d) of the Securities Exchange Act
of 1934
For the quarterly period ended June 30, 2001 or
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( ) Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission file number 000 - 18561
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AMERICANWEST BANCORPORATION
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(Exact Name of Registrant as Specified in Its Charter)
Washington 91-1259511
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
9506 North Newport Highway, Spokane, WA 99218-1200
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(Address of Principal Executive Offices)
(509) 467-6949
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(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 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 X No
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The issuer has one class of capital stock, that being common stock. On July 19,
2001, there were 7,482,930 shares of such stock outstanding.
1
AMERICANWEST BANCORPORATION
INDEX TO QUARTERLY REPORT ON FORM 10-Q
June 30, 2001
Table of Contents
Page
Independent Accountant's Report 3
Part I Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements of Condition - June 30,
2001 and December 31, 2000 ......................... ...... 4
Condensed Consolidated Statements of Income - Three and Six
Months Ended June 30, 2001 and 2000 ....................... 5
Condensed Consolidated Statements of Cash Flows - Six
Months Ended June 30, 2001 and 2000 ....................... 6
Notes to Consolidated Financial Statements ................ 7 - 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ....................... 9 - 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk. 11
Part II Other Information
Item 4. Submission of Matters to a Vote of Security Holders ....... 11
Item 6. Exhibits and Reports on Form 8-K .......................... 11
Signatures ............................................................. 12
2
AMERICANWEST BANCORPORATION
Independent Accountant's Report
Board of Directors and Shareholders
AmericanWest Bancorporation
We have reviewed the accompanying condensed consolidated statement of condition
of AmericanWest Bancorporation and subsidiaries as of June 30, 2001, and the
related condensed consolidated statements of income for the three and six months
ended June 30, 2001 and 2000, and cash flows for the six months ended June 30,
2001 and 2000. These financial statements are the responsibility of AmericanWest
Bancorporation's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated statement of condition of AmericanWest
Bancorporation and subsidiaries as of December 31, 2000, and the related
consolidated statements of income, stockholders' equity and cash flows for the
year then ended (which are not presented herein), and in our report dated
January 25, 2001, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated statement of condition as of December 31,
2000, is fairly presented, in all material respects, in relation to the
consolidated statement of condition from which it has been derived.
/s/ Moss Adams LLP
Everett, Washington
July 16, 2001
3
AMERICANWEST BANCORPORATION
AmericanWest Bancorporation and Subsidiaries
Condensed Consolidated Statements of Condition
($ In thousands) June 30, December 31,
ASSETS 2001 2000
Cash and due from banks $ 25,735 $ 28,580
Overnight interest bearing deposits with other banks 1,706 1,247
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Cash and cash equivalents 27,441 29,827
Securities 31,268 47,885
Loans, net of allowance for loan losses of $5,511 in 2001
and $4,948 in 2000 546,258 488,459
Accrued interest receivable 6,576 5,379
Premises and equipment, net 13,354 13,215
Foreclosed real estate and other foreclosed assets 1,730 1,510
Life insurance and salary continuation assets 4,352 4,304
Intangible assets 5,138 5,302
Other assets 1,712 2,632
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TOTAL ASSETS $ 637,829 $ 598,513
========== ==========
LIABILITIES
Noninterest bearing - demand deposits $ 87,296 $ 96,087
Interest bearing:
NOW and savings accounts 190,340 195,241
Time, $100,000 and over 71,306 71,735
Other time 160,116 138,363
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TOTAL DEPOSITS 509,058 501,426
Short-term borrowings 56,713 26,701
Capital lease obligations 648 666
Accrued interest payable 2,122 1,980
Other liabilities 3,303 3,210
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TOTAL LIABILITIES 571,844 533,983
STOCKHOLDERS' EQUITY
Common stock, no par, shares authorized 15,000,000; issued
and outstanding 7,428,930 in 2001 and 6,974,012 in 2000 54,907 48,904
Retained earnings 10,961 15,710
Accumulated other comprehensive income/(loss), net of tax 117 (84)
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TOTAL STOCKHOLDERS' EQUITY 65,985 64,530
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TOTAL LIABILITIES and STOCKHOLDERS' EQUITY $ 637,829 $ 598,513
========== ==========
The accompanying notes are an integral part of these statements.
4
AMERICANWEST BANCORPORATION
AMERICANWEST BANCORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Income
Three Months Ended Year-To-Date
($ In thousands, except per share) June 30, June 30,
2001 2000 2001 2000
INTEREST INCOME
Interest and fees on loans and leases $ 12,640 $ 11,006 $ 25,141 $ 21,339
Interest on securities 681 840 1,458 1,643
Other interest income 19 176 60 278
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TOTAL INTEREST INCOME 13,340 12,022 26,659 23,260
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INTEREST EXPENSE
Interest on deposits 4,595 4,539 9,694 8,802
Interest on borrowings 567 180 1,029 228
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TOTAL INTEREST EXPENSE 5,162 4,719 10,723 9,030
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NET INTEREST INCOME 8,178 7,303 15,936 14,230
Provision for loan losses 707 307 1,128 644
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NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 7,471 6,996 14,808 13,586
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NONINTEREST INCOME
Fees and service charges 661 644 1,241 1,240
Insurance commissions 7 233 317 467
Securities gains/(losses) 110 (6) 114 (12)
Other 548 172 905 391
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TOTAL NONINTEREST INCOME 1,326 1,043 2,577 2,086
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NONINTEREST EXPENSE
Salaries and employee benefits 3,049 3,104 6,552 6,233
Occupancy expense, net 443 442 963 887
Equipment expense 388 392 792 743
Intangible amortization 84 93 168 191
Other operating expense 1,358 1,117 2,708 2,314
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TOTAL NONINTEREST EXPENSE 5,322 5,148 11,183 10,368
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INCOME BEFORE TAXES 3,475 2,891 6,202 5,304
INCOME TAX EXPENSE 1,161 873 2,068 1,496
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NET INCOME $ 2,314 $ 2,018 $ 4,134 $ 3,808
============ ============ ============ ============
Basic earnings per common share $ 0.31 $ 0.25 $ 0.54 $ 0.47
Diluted earnings per common share $ 0.31 $ 0.25 $ 0.54 $ 0.46
Basic weighted average shares outstanding 7,519,930 8,048,252 7,590,940 8,173,964
Diluted weighted average shares outstanding 7,573,012 8,089,761 7,650,643 8,230,096
The accompanying notes are an integral part of these statements.
5
AMERICANWEST BANCORPORATION
AmericanWest Bancorporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Year-To-Date June 30, 2001 and 2000
($ in thousands)
2001 2000
Cash flows from operating activities:
Net income $ 4,134 $ 3,808
Provision for loan losses 1,128 644
Depreciation and amortization 521 540
(Increase)/decrease in assets and liabilities:
Accrued interest receivable (1,197) (1,263)
Life insurance and salary continuation assets (48) (182)
Other assets 1,110 (85)
Accrued interest payable 142 327
Other liabilities 93 568
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Net cash provided by operating activities 5,883 4,357
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Cash flows from investing activities:
Securities:
Maturities 10,344 4,687
Sales 21,112 1,512
Purchases (14,664) (6,568)
Net increase in loans (58,927) (35,743)
Sales of premises and equipment 26 26
Purchases of premises and equipment (686) (979)
Foreclosed real estate activity (220) (452)
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Net cash change in investing activities (43,015) (37,517)
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Cash flows from financing activities:
Net change in deposits 7,632 25,447
Short-term borrowings activity 30,012 10,745
Principal payments on capital lease obligations (18) (12)
Cash payments for stock repurchases (3,220) (4,175)
Cash received from stock sales 340 423
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Net cash provided by financing activities 34,746 32,428
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Net change in cash and cash equivalents (2,386) (732)
Cash and cash equivalents, beginning of year 29,827 26,019
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Cash and cash equivalents, end of quarter $ 27,441 $ 25,287
========== ==========
The accompanying notes are an integral part of these statements.
6
AMERICANWEST BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. Management Statement
The consolidated financial statements include AmericanWest Bancorporation and
it's wholly owned subsidiaries (AWBC), AmericanWest Bank, and AmericanWest Bank,
NA after eliminating all significant intercompany balances and transactions.
Effective January 16, 2001, United Security Bank, Home Security Bank, Bank of
Pullman, and AmericanWest Bank were merged to form AmericanWest Bank
headquartered in Spokane, Washington. The merged bank is a state-chartered
commercial bank under the laws of the State of Washington. Effective March 1,
2001 United Security Bancorporation changed its name to AmericanWest
Bancorporation and its Nasdaq stock symbol to AWBC. Effective April 13, 2001
Grant National Bank changed its name to AmericanWest Bank, NA. Effective
April 1, 2001 AWBC sold its insurance subsidiary, USB Insurance Agencies, Inc.
The interim unaudited consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with instructions to Form 10-Q and Article 10 of Regulation S-X.
In the opinion of management, all adjustments consisting only of normal
recurring accruals necessary for a fair presentation of the financial condition,
the results of operations, and cash flows for the interim periods included
herein have been made. The consolidated statement of condition of AWBC as of
December 31, 2000 has been derived from the audited consolidated statement of
condition of AWBC as of that date. The results of operations for the six months
ended June 30, 2001, are not necessarily indicative of results to be anticipated
for the year ending December 31, 2001. For additional information, refer to the
consolidated financial statements and footnotes thereto included in AWBC's
annual report on Form 10-K for the year ended December 31, 2000.
NOTE 2. Securities
The securities are classified as available-for-sale and are stated at fair
value, and unrealized holding gains and losses, net of related deferred taxes,
are reported as a separate component of stockholders' equity. Gains or losses on
available-for-sale securities sales are reported as part of noninterest income
based on the net proceeds and the adjusted carrying amount of the securities
sold, using the specific identification method.
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AMERICANWEST BANCORPORATION
Carrying amount and fair values at June 30, 2001 and December 31, 2000 were as
follows:
June 30, 2001 December 31, 2000
Amortized Fair Financial Amortized Fair Financial
($ in thousands) Cost Value Statements Cost Value Statements
U.S. Treasury securities $ 2,000 $ 2,048 $ 2,048 $ 2,500 $ 2,538 $ 2,538
Obligations of federal government agencies 8,396 8,455 8,455 18,054 17,975 17,975
Mortgage backed securities 4,138 4,105 4,105 9,246 9,093 9,093
Obligations of states, municipalities and
political subdivisions 2,875 2,908 2,908 7,458 7,592 7,592
Other securities 13,682 13,752 13,752 10,755 10,687 10,687
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Total $31,091 $31,268 $31,268 $48,013 $47,885 $47,885
=============================== ===============================
NOTE 3. LOANS
Loan detail by category as of June 30, 2001 and December 31, 2000 were as
follows:
($ in thousands) June 30, 2001 December 31, 2000
Commercial and industrial $ 371,319 $ 317,108
Agricultural 93,329 76,093
Real estate mortgage 42,486 62,173
Real estate construction 17,014 12,252
Installment 22,782 22,489
Bank cards and other 5,532 3,972
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Total loans 552,462 494,087
Allowance for loan losses (5,511) (4,948)
Deferred loan fees, net of deferred costs (693) (680)
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Net loans $ 546,258 $ 488,459
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NOTE 4. ALLOWANCE FOR LOAN LOSSES
The allowance for loan loss is maintained at levels considered adequate by
management to provide for possible loan losses. The allowance is based on
management's assessment of various factors affecting the loan portfolio,
including problem loans, business conditions and loss experience, and an overall
evaluation of the quality of the underlying collateral. Changes in the allowance
for loan losses during the three and six months ended June 30, 2001 and 2000
were as follows:
Three Months Ended Year-To-Date
June 30, June 30,
($ in thousands) 2001 2000 2001 2000
Balance, beginning of period $ 5,276 $ 4,307 $ 4,948 $ 4,349
Provision for loan losses 707 307 1,128 644
Loan charge-offs (498) (345) (607) (747)
Loan recoveries 26 31 42 54
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Balance, end of period $ 5,511 $ 4,300 $ 5,511 $ 4,300
======== ======== ======== ========
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AMERICANWEST BANCORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion contains a review of the results of operations and
financial condition for second quarter and the year-to-date results in 2001 and
2000. This information should be read in conjunction with the financial
statements and related notes appearing in this report. The reader is assumed to
have access to AWBC's Form 10-K for the year ended December 31, 2000, which
contains additional information.
This discussion may contain certain forward-looking statements, which are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Such statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
stated. Readers are cautioned not to place undue reliance on these
forward-looking statements.
Overview
A performance summary and detailed discussion regarding the second quarter and
year-to-date results for 2001 and 2000 follows.
AMERICANWEST BANCORPORATION AND SUBSIDIARIES
PERFORMANCE SUMMARY
Three Months Ended June 30, Year-To-Date June 30,
% %
($ in thousands, except per share) 2001 2000 Change 2001 2000 Change
Interest income $13,340 $12,022 11.0% $26,659 $23,260 14.6%
Interest expense 5,162 4,719 9.4% 10,723 9,030 18.7%
-------- -------- ------- -------- -------- -------
Net interest income 8,178 7,303 12.0% 15,936 14,230 12.0%
Provision for loan losses 707 307 130.3% 1,128 644 75.2%
-------- -------- ------- -------- -------- -------
Net interest income after provision for loan losses 7,471 6,996 6.8% 14,808 13,586 9.0%
Noninterest income 1,326 1,043 27.1% 2,577 2,086 23.5%
Noninterest expense 5,322 5,148 3.4% 11,183 10,368 7.9%
-------- -------- ------- -------- -------- -------
Income before income taxes 3,475 2,891 20.2% 6,202 5,304 16.9%
Income taxes 1,161 873 33.0% 2,068 1,496 38.2%
-------- -------- ------- -------- -------- -------
Net income $ 2,314 $ 2,018 14.7% $ 4,134 $ 3,808 8.6%
======== ======== ======= ======== ======== =======
Basic earnings per common share $ 0.31 $ 0.25 24.0% $ 0.54 $ 0.47 14.9%
Diluted earnings per common share $ 0.31 $ 0.25 24.0% $ 0.54 $ 0.46 17.4%
Net Income
AWBC reported net income of $2,314,000 for the second quarter of 2001 compared
to $2,018,000 for the same period in 2000. Diluted earnings per share were $.31
in 2001 and $.25 in 2000. Net income for the first half of 2001 was $4,134,000
and $.54 per share compared to $3,808,000 and $.46 per share in 2000. AWBC sold
its subsidiary USB Insurance during second quarter for a gain of $391,000.
During second quarter 2001 AWBC had $284,000 of bank subsidiary merger expense,
and $186,000 of nonperforming loan legal expense. First quarter 2001 results
included a $142,000 gain
9
AMERICANWEST BANCORPORATION
on the sale of AWBC's interest in TransAlliance. The net of these 2001 items
improved net income by $41,000 with no impact on earnings per share.
Net Interest Income
Year 2001 net interest income grew 12% to $15,936,000 compared to $14,230,000 in
2000. The growth in net interest income was due to loan volume growth, which on
an average basis grew 20% to $517 million in 2001 from $431 million in 2000. The
net interest margin to average earning assets declined from 5.83% in 2000 to
5.66% in 2001.
Provision for Loan Losses
The allowance for possible loan losses is based on AWBC's Credit Management's
evaluation of the loan portfolio. The allowance for loan losses is 1.00% of
loans as of June 30, 2001 and .94% as of June 30, 2000. Loans outstanding have
grown 21% during that same period.
Noninterest Income
Noninterest income increased 24% to $2,577,000 comparing 2001 to 2000. The
$391,000 gain on the sale of the Insurance Company and the $142,000 gain on the
sale of TransAlliance described above are the primary reasons for the
significant increase. Insurance commissions have declined in 2001 due to the
sale of the Insurance Agency. AWBC had gains on the sale of securities of
$110,000 during second quarter 2001 for liquidity purposes and due to concerns
about term interest rates.
Noninterest Expense
Noninterest expense increased 8% to $11,183,000 in 2001 from $10,368,000 in
2000. The increase was primarily due to loan officer incentive expense,
nonperforming loan legal expense and bank subsidiary merger expense.
Nonperforming Assets
Total nonperforming assets increased to $15.8 million or 2.48% of total assets
in the second quarter of 2001 compared to $7.6 million or 1.35% the year before.
The majority of the nonperforming assets involve four borrowers, which
management believes are secured on a $4 million retail/office complex near
downtown Spokane. We are well secured on two ice skating complexes in Spokane
for another $4 million. The fourth borrower of $1.0 million is to an orchard
growing operation in the Yakima Valley region. The allowance for loan losses was
$5.5 million, equal to 1.00% of total loans and 39.1% of nonperforming loans as
of June 30, 2001.
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AMERICANWEST BANCORPORATION
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Management considers interest rate risk to be a market risk that could have a
significant effect on the financial condition of AWBC. There have been no
material changes in reported market risks faced by AWBC since the end of the
most recent fiscal year.
Part II
Other Information
Item 4. Submission of Matters to a Vote of Security Holders
(a) Annual meeting of shareholders was held on May 29, 2001.
(b) Proxies for the annual meeting were solicited pursuant to Regulation
14 under the Act.
(c) Matters voted upon at the meeting.
Proposal 1 - Election of Directors
For Withhold
Wesley E. Colley 6,016,775 76,585
James Rand Elliott 6,015,183 78,177
David E. Frame 6,015,183 76,585
Robert J. Gardner 6,014,456 78,904
Keith P. Sattler 6,014,862 78,498
Donald H. Swartz II 6,009,230 84,130
P. Mike Taylor 5,915,568 78,449
Proposal 2 - Adoption of the 2001 Incentive Stock Plan
For Against Abstain Not Voted
3,697,731 514,464 81,161 1,723,885
Proposal 3 - Adoption of the 2001 Employee Stock Purchase Plan
For Against Abstain Not Voted
4,005,503 299,755 76,530 1,723,885
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None in second quarter 2001.
(b) Reports on Form 8-K
None in second quarter 2001.
11
AMERICANWEST BANCORPORATION
AmericanWest Bancorporation
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 on July 19, 2001.
AMERICANWEST BANCORPORATION
\s\ Wes Colley
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Wes Colley, President and
Chief Executive Officer
\s\ Dan Murray
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Dan Murray, Senior Vice President and
Credit Administrator
\s\ Chad Galloway
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Chad Galloway, Vice President and
Chief Financial Officer
12