AmericanWest Bancorporation officials said Friday they are taking steps to comply with a pending “cease and desist” order from the Federal Deposit Insurance Corp. and the Washington Department of Financial Institutions.
The order resulted from a routine FDIC audit of Spokane-based AmericanWest Bank conducted last fall.
The order requires AmericanWest to:
•Raise more capital and improve capital ratios.
•Aggressively address problematic construction and development loans.
•Reduce the total amounts of brokered deposits issued.
•Cut costs through consolidation and worker reductions.
“There’s nothing in here that came as a surprise,” Chief Executive Officer Patrick Rusnak said.
He said investors, who bid the price of AmericanWest shares up 6 cents Friday, were also aware of the regulators’ concerns. “The bad news is priced in,” Rusnak said.
He said AmericanWest has cut salary expenses by $8 million, reduced its exposure to loans of more than $1 million, and developed a plan that will return the institution to profitability.
The bank lost $14.5 million during the first quarter, in large part because of a $13.7 million provision for loan losses.
Spokeswoman Kelly McPhee said brokered deposits – essentially certificates of deposit for short-term investors – have been reduced from $240 million in mid-2007 to $27 million today. The total will decline to $2 million when $25 million in CDs mature next month, she said.
Brokered deposits are considered non-core assets because investors will move them quickly when higher returns are available at another bank.
Rusnak said AmericanWest should be able to meet deadlines set in the cease and desist order, or will be able to show regulators enough progress toward compliance that they can give the bank additional time.
Some factors – liquidity in the financial markets, for example – are beyond the bank’s control, but prospects for raising more capital will improve as credit markets thaw, he said.
In light of the damage done to all banks by the market implosion last fall, Rusnak said, regulators are keeping the pressure on bank officials everywhere to tighten up their operations.
The FDIC issued orders to more than 90 banks in the first quarter of this year, including three to other Washington banks. Orders are lifted as banks reach full compliance.
“What we want people to know,” McPhee said, “is this does not change how we do business or how we deal with our customers.”