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Q3 2008 AmericanWest Bancorp. Earnings Conference Call - Final.

Article Excerpt
OPERATOR: Hello, ladies and gentlemen, and welcome to the AmericanWest Bancorporation's third quarter 2008 conference call. (OPERATOR INSTRUCTIONS) Please note, the conference is being recorded. Now I would like to turn the conference over to Pat Rusnak, President and Chief Executive Officer. Sir, you may begin.

PAT RUSNAK, PRESIDENT, CEO, AMERICANWEST BANCORP.: Thank you, Camille. Good morning, and welcome to the AmericanWest Bancorporation third quarter conference call. With me here this morning is Rick Shamberger, our Chief Credit Officer. The call is being recorded and will be available for replay approximately one hour after its conclusion and 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 pass code 424626#.

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 expectations are included in AmericanWest's 2007 Form 10-K 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 conference call to reflect subsequent events or circumstances.

I will start this morning's call by discussing initiatives currently underway at AmericanWest. As announced in this morning's press release, AmericanWest has hired Brad Smith as Executive Vice President and Chief Banking Officer for the Washington and Idaho markets, and appointed Nicole Sherman to the position of Executive Vice President and Chief Banking Officer for the Utah market. In addition, the bank has received regulatory approval for my appointment as the permanent President and Chief Executive Officer. We will be initiating a search for a Chief Financial Officer in the near future.

The new business model launched today includes a revised organizational structure that strengthens risk management and streamlines the management structure. The central focus of the Company's revised business model is a consolidation of its retail banking, commercial banking and private banking delivery channels into a single channel focused on community banking. The Company expects the streamline business model will result in annualized pre-tax non-interest expense savings of approximately $5 million upon completion of its implementation which is expected by year-end 2008.

In addition to the new business model, management has identified six financial centers in the Washington and Idaho market that did not currently meet and were not likely to meet in the future targeted performance levels or that were in such close proximity to other centers that two could easily be combined without significant diminishment in customer convenience. As a result, the Company's initiated a process to formally close the following financial centers, Edison, Latah, Oaksdale, Qualchan, St. Maries (in-store) and West Plains. All customer accounts currently domiciled in the affected financial centers will automatically be transferred to the nearest AmericanWest financial center.

The closure of financial centers is subject to statutory notice periods and management expects the consolidations will be completed during the first quarter of 2009. We expect these consolidations will result in initial annualized pre-tax expense savings of approximately $650,000 a year with an additional $350,000 of annual savings realized upon the disposition of the related facilities. The Company will be working closely with local community leaders to ensure that any adverse impacts of the closures are minimized and will evaluate the feasibility of providing financial incentives for the bank facilities to be utilized under economic redevelopment initiatives.

We expect to record a pre tax charge to cover employee severance related expenses of approximately $750,000 associated with the mentioned business model and closure of the branches and a majority of this charge will be recognized during the fourth quarter of 2008. In addition, we have completed a consolidation of space in our headquarters building in Spokane and entered into a sublease for one entire floor effective October 1. This will result in annualized premises expense savings of approximately $200,000 a year.

I'll now cover review of our operating results for the third quarter which included a net after tax loss of $96.9 million or $5.63 per share. Excluding the goodwill impairment charge, the net after tax loss was $14.9 million or $0.87 per share. This compares to a net loss of $6.2 million or $0.36 per share for the second quarter and net income of $5.3 million or $0.31 per share for the third quarter of 2007. The results for the third quarter of 2008 reflected a provision for loan losses of $27.7 million as compared to the second quarter provision for loan losses of $16.4 million. This will be addressed more specifically later in our prepared remarks.

The tax equivalent net interest margin for the third quarter of 2008 was 3.89%, down 30 basis points from the second quarter of 2008...

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