AmericanWest Bancorp in Spokane is speeding up its Utah expansion with a deal to buy the $405 million-asset Far West Bancorp in Provo for about $150 million in cash and stock.
The $1.4 billion-asset AmericanWest said Thursday that buying Far West and its 16-branch Far West Bank would give it more access to the high-growth markets in Utah along the Interstate-15 corridor.
AmericanWest opened a loan production office in the Salt Lake City area this year and plans to open up to four branches there by the end of next year. Robert M. Daugherty, its president and chief executive, said in an interview Thursday that his company was eager to accelerate its expansion.
"The economy in Utah is so vibrant, due to good population growth." People, mainly from California's expensive, crowded cities, "have been looking for a better quality of life, not sitting in three-hour traffic jams," Mr. Daugherty said. "I'm anticipating significant growth in both our loans and deposits to come from Utah in 2007 and beyond."
Population in two of Far West's markets, Provo and St. George, are projected to grow more than 25% by 2010, far above the national average.
James Bradshaw, an analyst with D.A. Davidson & Co. in Portland, Ore., said the price would work out to three times Far West's book value after Far West pays a special dividend of $6.9 million. At 15 times trailing earnings, the price is reasonable, he said.
After the acquisition AmericanWest would have about $1.8 billion of assets and 59 branches.
Mr. Daugherty said the deal fits with AmericanWest's new strategy of increasing assets by opening branches in new markets and buying more banks. In March, AmericanWest acquired the $215 million-asset Columbia Trust Bancorp in Pasco, Wash.
The Far West acquisition, which would be accretive to earnings next year, should help boost AmericanWest's sluggish earnings.
Its second-quarter net income fell 22% from a year earlier, to $2.8 million, as deposits declined and loan growth was slow in its markets in Washington and Idaho, though AmericanWest is indicating that loan and deposit growth increased in the third quarter. The company is scheduled to release third-quarter earnings Tuesday.
It is also still recovering from credit-quality troubles.
Far West, on the other hand, has had strong loan and deposit growth, and its performance ratios are well above industry averages. As of June 30 it had a net interest margin of 8.4%, a return on assets of 2.8%, and a return on equity of 20.5%.
The deal is expected to close next quarter. Far West would retain its name, and Don Norton, its president and CEO, would run AmericanWest's Utah operations.
Michael McMahon, an analyst in San Francisco with Sandler O'Neill & Partners LP, said he is glad to see that Far West's key management would be retained.
"When management walks away, there's always a great chance for customer attrition," Mr. McMahon said. "But a portion of Far West's team will be able to continue to cultivate the relationships with customers they've generated over time, and that's really, really important."
