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Q1 2008 AmericanWest Bancorp. Earnings Conference Call - Final.

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Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Hello and welcome to the AmericanWest Bancorporation first-quarter 2008 conference call. All participants will be in listen-only mode. There will be an opportunity for you to ask questions at the end of today's presentation. (OPERATOR INSTRUCTIONS). Please note this conference is being recorded. Now I would like to turn the conference over to Pat Rusnak. Mr. Rusnak is the Chief Operating Officer. Please go ahead.

PAT RUSNAK, COO, AMERICANWEST BANCORPORATION: Good morning and welcome to the AmericanWest Bancorporation first-quarter financial results conference call. With me here this morning are Bob Daugherty, President and CEO and Rick Shamberger, the Chief Credit Officer.

The call is being recorded and will be available for replay approximately one hour after its conclusion. It will be available for 30 days. The recording may be accessed through our website at www.awbank.net/IR or by calling 877-344-7529 and entering the passcode 418315#.

During this call, we may make statements regarding future events, performance targets or results that are forward-looking in nature, which AmericanWest intends to be covered under the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected.

Factors which may cause actual results to differ from expected results are included in AmericanWest's 2007 Form 10-K, which was filed with the SEC on March 4, 2008. AmericanWest cautions investors not to place undue reliance upon forward-looking statements and undertakes no obligation to publicly revise any forward-looking statements made during this call to reflect subsequent events or circumstances.

I will begin with a review of our operating results for the first quarter, which included a net after-tax loss of $31.6 million or $1.83 per share. Included in the first-quarter results was a goodwill impairment charge of $27 million or $1.57 per share. There was no tax benefit for this impairment charge. Excluding a goodwill impairment, the net loss for the quarter was $4.6 million or $0.26 per share. This compares with a net loss of $3.5 million or $0.21 per share for the fourth quarter of 2007 and net income of $2.2 million or $0.19 per diluted share for the similar period of the prior year.

The results for the first quarter reflect a provision for loan losses of $12.8 million as compared with $14.6 million for the fourth quarter of 2007. Our operating results were clearly disappointing, driven principally by continuing challenges with our construction and development portfolio and margin compression due to additional Fed easing in the first quarter and the impact of increased non-accrual loans.

I will start by covering the margin. The tax equivalent net interest margin for the first quarter of 2008 was 4.62%, down 35 basis points from the fourth quarter of 2007 and seven basis points from the same period in 2007. The impact of non-accrual loans on the margin for the first quarter was approximately 15 basis points.

The average yield on loans for the first quarter of 2008 was 7.41%, down 62 basis points on a linked-quarter basis and 61 basis points from the first quarter of 2007. The reduction in the average yield on loans was due in part to the repricing of approximately $800 million of variable rate loans, most of which are indexed to prime. As of March 31, 2008, approximately 42% of the portfolio was indexed to prime with a reset of less than three months with the balance of the portfolio split about evenly between hybrid adjustable and fixed-rate loans. Fixed-rate loans had an average remaining contraction maturity of approximately eight years.

Approximately $113 million or 14% of the $740 million of variable rate loans tied to prime had contractual interest rate floors. The current average floor rate as of March 31, 2008 was 7.61%. As a result, about 85% of the loans were at or below the contractual floor level at March 31.

Loan fees comprised 30 basis points of the average loan yield for the first quarter as compared to 37 basis points for the fourth quarter of 2007 and 21 basis points for the first quarter of 2007. Net deferred loan fees represented about 18 basis points of total loans at March 31, 2008 as compared to 21 basis points at December 31, 2007. A substantial portion of our deferred fees are from construction and development loans. As origination of these types of loans has been significantly curtailed, we expect that the contribution of fees to loan yield and the level of net deferred fees will both decline over the balance of 2008.

The average rate, exclusive of fees, for new loans booked during the first quarter of 2008 was 6.42% as compared to 7.77% for the fourth quarter of 2007. The average prime rate for the first quarter was down 120 basis points from the fourth quarter of 2007. Fixed-rate loans represented about 32% of the production for the quarter with an average rate of 6.70%. The average rate for the first-quarter new variable and adjustable rate loan production was 6.29%.

The impact of the reversal of previously accrued interest related to the placement of loans on non-accrual status and the recapture of previously reversed interest income on loans restored to accrual status did not have a material impact on net interest income for the first quarter of 2008.

The average cost of interest-bearing deposits for the first quarter of 2008 decreased by 42 basis points compared to the fourth quarter of 2007 and 79 basis points from the same period last year, a continued reflection of our actions first initiated in September 2007 to reduce both interest-bearing transaction account and CD deposit rates with each Fed easing.

Average deposits decreased by $30 million during the first quarter as compared to the fourth quarter of 2007 while the ending total deposits increased by $53 million over year-end 2007. Average CDs as compared to the fourth quarter increased by $12 million, which included an increase of $26 million in brokered CDs. This was more than offset by declines in average non-interest-bearing deposits of $24 million and savings and money market accounts of $14 million. The average non-interest-bearing deposits were 21% of total average deposits for the first quarter compared to 22% for the fourth quarter of 2007.

The margin for the...

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