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
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Act of 1934
For the quarterly period ended March 31, 2001 or
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(_) Transition report pursuant to Section 13 or 15 (d) of the Securities
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Exchange Act of 1934
For the transition period from ______________________ to __________________
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 April
19, 2001, there were 7,584,796 shares of such stock outstanding.
1
AMERICANWEST BANCORPORATION
INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 2001
Table of Contents
Page
Independent Accountant's Report 3
Part I Financial Information
Item 1. Financial Statements
Consolidated Statements of Condition - March 31, 2001
and December 31, 2000....................................................................... 4
Consolidated Statements of Income - Three Months Ended
March 31, 2001 and 2000..................................................................... 5
Consolidated Condensed Statements of Cash Flows -
Three Months Ended March 31, 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 6. Exhibits and Reports on Form 8-K ........................................................... 11
Signatures..................................................................................................... 11
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 March 31, 2001, and the
related condensed consolidated statements of income for the three months ended
March 31, 2001 and 2000, and cash flows for the three months ended March 31,
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
April 13, 2001
3
AMERICANWEST BANCORPORATION
AmericanWest Bancorporation and Subsidiaries
Consolidated Statements of Condition
($ In thousands) March 31, December 31,
ASSETS 2001 2000
Cash and due from banks $ 26,281 $ 28,580
Overnight interest bearing deposits with other banks 2,813 1,247
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Cash and cash equivalents 29,094 29,827
Securities 55,194 47,885
Loans, net of allowance for loan losses of $5,276 in 2001
and $4,948 in 2000 507,424 488,459
Accrued interest receivable 5,881 5,379
Premises and equipment, net 13,466 13,215
Foreclosed real estate and other foreclosed assets 1,542 1,510
Life insurance and salary continuation assets 4,307 4,304
Intangible assets 5,220 5,302
Other assets 1,501 2,632
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TOTAL ASSETS $623,629 $598,513
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LIABILITIES
Noninterest bearing - demand deposits $ 88,262 $ 96,087
Interest bearing:
NOW and savings accounts 203,315 195,241
Time, $100,000 and over 70,903 71,735
Other time 155,383 138,363
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TOTAL DEPOSITS 517,863 501,426
Short-term borrowings 34,668 26,701
Capital lease obligations 657 666
Accrued interest payable 2,301 1,980
Other liabilities 2,319 3,210
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TOTAL LIABILITIES 557,808 533,983
STOCKHOLDERS' EQUITY
Common stock, no par, shares authorized 15,000,000; issued
and outstanding 7,611,403 in 2001 and 6,974,012 in 2000 56,224 48,904
Retained earnings 9,270 15,710
Accumulated other comprehensive income/(loss), net of tax 327 (84)
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TOTAL STOCKHOLDERS' EQUITY 65,821 64,530
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TOTAL LIABILITIES and STOCKHOLDERS' EQUITY $623,629 $598,513
============== ============
The accompanying notes are an integral part of these statements.
4
AMERICANWEST BANCORPORATION
AmericanWest Bancorporation and Subsidiaries
Consolidated Statements of Income
Three Months Ended
($ In thousaands except per share) March 31,
2001 2000
INTEREST INCOME
Interest and fees on loans and leases $ 12,501 $ 10,333
Interest on securities 777 803
Other interest income 41 102
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TOTAL INTEREST INCOME 13,319 11,238
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INTEREST EXPENSE
Interest on deposits 5,099 4,263
Interest on borrowings 462 48
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TOTAL INTEREST EXPENSE 5,561 4,311
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NET INTEREST INCOME 7,758 6,927
Provision for loan losses 421 337
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NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 7,337 6,590
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NONINTEREST INCOME
Fees and service charges 580 596
Insurance commissions 310 234
Securities gains/(losses) 4 (6)
Other 357 219
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TOTAL NONINTEREST INCOME 1,251 1,043
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NONINTEREST EXPENSE
Salaries and employee benefits 3,503 3,129
Occupancy expense, net 520 445
Equipment expense 404 351
Intangible assets amortization 84 98
Other operating expense 1,350 1,197
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TOTAL NONINTEREST EXPENSE 5,861 5,220
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INCOME BEFORE INCOME TAX EXPENSE 2,727 2,413
INCOME TAX EXPENSE 907 623
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NET INCOME $ 1,820 $ 1,790
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Basic earnings per common share $ 0.24 $ 0.22
Diluted earnings per common share $ 0.24 $ 0.21
Basic weighted average shares outstanding 7,662,738 8,301,072
Diluted weighted average shares outstanding 7,729,162 8,367,666
The accompanying notes are an integral part of these statements.
5
AmericanWest Bancorporation and Subsidiaries
Consolidated Statements of Cash Flows
Year-To-Date March 31, 2001 and 2000
($ in thousands)
2001 2000
Cash flows from operating activities:
Net income $ 1,820 $ 1,790
Provision for loan losses 421 337
Depreciation and amortization 266 250
(Increase)/decrease in assets and liabilities:
Accrued interest receivable (502) (604)
Life insurance and salary continuation assets (3) (40)
Other assets 1,213 61
Accrued interest payable 321 115
Other liabilities (891) 447
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Net cash provided by operating activities 2,645 2,356
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Cash flows from investing activities:
Securities:
Maturities 6,656 50
Sales 645 2,950
Purchases (14,199) (1,918)
Net increase in loans (19,386) (1,566)
Sales of premises and equipment 24
Purchases of premises and equipment (517) (652)
Foreclosed real estate activity (32) 15
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Net cash change in investing activities (26,833) (1,097)
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Cash flows from financing activities:
Net change in deposits 16,437 12,574
Short-term borrowings activity 7,967 (5,808)
Principal payments on capital lease obligations (9) (6)
Cash payments for stock repurchases (1,191) (4,175)
Cash received from stock sales 251 417
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Net cash provided by financing activities 23,455 3,002
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Net change in cash and cash equivalents (733) 4,261
Cash and cash equivalents, beginning of year 29,827 26,019
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Cash and cash equivalents, end of quarter $ 29,094 $ 30,280
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The accompanying notes are an integral part of these statements.
6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. Management Statement
The consolidated financial statements include AmericanWest Bancorporation and
its wholly owned subsidiaries (AWBC), AmericanWest Bank, AmericanWest Bank, NA,
and USB Insurance Agencies, Inc. 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.
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 three
months ended March 31, 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. Carrying amount and
fair values at March 31, 2001 and December 31, 2000 were as follows:
March 31, 2001 December 31, 2000
Amortized Fair Financial Amortized Fair Financial
($ in thousands) Cost Value Statements Cost Value Statements
U.S. Treasury securities $ 2,000 $ 2,055 $ 2,055 $ 2,500 $ 2,538 $ 2,538
Obligations of federal government agencies 23,345 24,542 24,542 18,054 17,975 17,975
Mortgage backed securities 8,169 8,170 8,170 9,246 9,093 9,093
Obligations of states, municipalities and
political subdivisions 7,303 7,519 7,519 7,458 7,592 7,592
Other securities 12,883 12,908 12,908 10,755 10,687 10,687
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Total $ 53,700 $ 55,194 $ 55,194 $ 48,013 $ 47,885 $ 47,885
================================= ===================================
7
NOTE 3. LOANS
Loan detail by category as of March 31, 2001 and December 31, 2000 were as
follows:
($ in thousands) March 31, 2001 December 31, 2000
Commercial and industrial $350,539 $317,108
Agricultural 77,057 76,093
Real estate mortgage 44,817 62,173
Real estate construction 13,048 12,252
Installment 22,230 22,489
Bank cards and other 5,687 3,972
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Total loans 513,378 494,087
Allowance for loan losses (5,276) (4,948)
Deferred loan fees, net of deferred costs (678) (680)
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Net loans $507,424 $488,459
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NOTE 4. ALLOWANCE FOR LOAN LOSSES
The allowance for loan loss is maintained at levels considered adequate by
management to provide for possible loan losses. The allowance is based on
management's assessment of various factors affecting the loan portfolio,
including problem loans, business conditions and loss experience, and an overall
evaluation of the quality of the underlying collateral. Changes in the
allowance for loan losses during the three months ended March 31, 2001 and 2000
were as follows:
Three Months Ended
March 31,
($ in thousands) 2001 2000
Balance, beginning of period $4,948 $4,349
Provision for loan losses 421 337
Loan charge-offs (109) (402)
Loan recoveries 16 23
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Balance, end of period $5,276 $4,307
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion contains a review of the results of operations and
financial condition for first quarter in 2001 and 2000. This information should
be read in conjunction with the financial statements and related notes appearing
in this report. The reader is assumed to have access to AWBC's Form 10-K for
the year ended December 31, 2000, which contains additional information.
This discussion may contain certain forward-looking statements, which are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Such statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
stated. Readers are cautioned not to place undue reliance on these forward-
looking statements.
Overview
A performance summary and detailed discussion regarding the first quarter
results for 2001 and 2000 follows this table.
AMERICANWEST BANCORPORATION AND SUBSIDIARIES
PERFORMANCE SUMMARY
Three Months Ended March 31,
%
($ in thousands, except per share) 2001 2000 Change
Interest income $13,319 $11,238 18.5%
Interest expense 5,561 4,311 29.0%
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Net interest income 7,758 6,927 12.0%
Provision for loan losses 421 337 24.9%
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Net interest income after provision for loan losses 7,337 6,590 11.3%
Noninterest income 1,251 1,043 19.9%
Noninterest expense 5,861 5,220 12.3%
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Income before income taxes 2,727 2,413 13.0%
Income taxes 907 623 45.6%
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Net income $ 1,820 $ 1,790 1.7%
======= ======= =======
Basic earnings per common share $ 0.24 $ 0.22 9.1%
Diluted earnings per common share $ 0.24 $ 0.21 14.3%
Net Income
AWBC reported net income of $1,820,000 for the first quarter of 2001 compared to
$1,790,000 for the same period in 2000. Diluted earnings per share were $.24 in
2001 and $.21 in 2000. First quarter 2001 results included a $142,000 gain on
the sale of AWBC's interest in TransAlliance, which improved net earnings for
the quarter by $94,000 and $.01 per share.
9
Net Interest Income
Year 2001 net interest income grew 12% to $7,758,000 compared to $6,927,000 in
2000. The growth in net interest income was due to loan volume growth, which on
an average basis grew 19% to $500 million in 2001 from $420 million in 2000.
The net interest margin to average earning assets declined from 5.79% in 2000 to
5.66% in 2001.
Provision for Loan Losses
The allowance for possible loan losses is based on management's evaluation of
the loan portfolio. The allowance for loan losses is 1.03% of loans as of March
31, 2001 and 1.02% as of March 31, 2000. Loans outstanding have grown 21%
during that same period.
Noninterest Income
Noninterest income increased 20% to $1,251,000 comparing 2001 to 2000. The
$142,000 gain on the sale of TransAlliance described above is included in 2001
results in other income. Insurance commissions improved in 2001 as USB
Insurance received a $91,000 insurance performance contingency bonus based on
its volume of insurance business and insurance claims received.
Noninterest Expense
Noninterest expense increased 12% to $5,861,000 in 2001 from $5,220,000 in 2000.
The increase was primarily due to employee incentive expense, and bank merger
expense.
10
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 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None in first quarter 2001.
(b) Reports on Form 8-K
Date Item # Subject
March 2, 2001 5 United Security Bancorporation changes name to
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 April 19, 2001.
AMERICANWEST BANCORPORATION
\s\ Wes Colley
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Wes Colley, President and
Chief Executive Officer
\s\ Chad Galloway
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Chad Galloway, Vice President and
Chief Financial Officer
11