Let the bidding begin, perhaps, for a Spokane bank.
AmericanWest Bancorp announced today that it would sell its subsidiary AmericanWest Bank, thereby raising capital and restoring compliance to regulatory orders.
The company operates branches throughout Eastern Washington and Northern Idaho, and in Utah with its subsidiary division, Far West Bank.
To facilitate the deal, the holding company intends to file Chapter 11 bankruptcy, and it is expected that the bankruptcy court will supervise a competitive bidding process.
Privately held SKBHC Holdings of California has signed a purchase agreement to acquire all AmericanWest Bank stock for $6.5 million in cash, and to recapitalize the bank with an additional $200 million that would satisfy regulatory requirements, the holding company said in a release this afternoon.
Any competing bidder would be required to recapitalize the bank, as agreed by SKBHC, and meet any regulatory approvals.
Typically, bank takeovers either see regulators closing a bank and assisting a new buyer, or else another bank will simply pay shareholders to acquire the assets of the bank being sold.
This transaction is “very unusual. I think this is like the third or fourth in the country,” said Brad Williamson, director of banks for the state Department of Financial Institutions.
The AmericanWest deal signals that private capital – SKBHC – is ready to enter the bank-ownership arena.
“In my opinion, the investment community feels that we’re at the bottom,” Williamson said. “They are now very interested in acquiring banks.”
By entering bankruptcy, the holding company will be relieved of responsibility to repay some investors who had purchased investments including “trust preferred securities.” Common shares will also lose value.
In May 2009, regulators issued a cease-and-desist order against AmericanWest, demanding that the bank raise capital and change its loan procedures. Should the bank be recapitalized, it is likely that regulators will lift the earlier requirements.
As the process continues, branches of AmericanWest and Far West Bank will remain open for business.
“Customers will have full access to their accounts and the bank’s other services,” said Pat Rusnak, president and CEO.
The additional capital, he said, “will enable us to do even more to meet the needs of our loan customers going forward, and will allow us to return to more normal lending levels after 18 months of dramatically curtailed lending activities due to constraints that resulted form our lower capital levels.”
AmericanWest could be an attractive investment for regional banks seeking to expand into markets east of the Puget Sound or northern Oregon, and at least two dozen institutions had reviewed the bank’s assets before Wednesday’s announcement.
The possibility of strong competitive bidding against the SKBHC offer appears unlikely, said AmericanWest spokeswoman Kelly McPhee late Wednesday afternoon.