With Robert M. Daugherty at the helm, AmericanWest Bancorp in Spokane had been in growth mode for the last four years, buying up banks, opening branches, and adding deposit and loan products.
The investments had yet to pay off when the mortgage crisis hit, and after three quarters of losses resulting from huge provisions for bad residential construction loans, AmericanWest's board decided it was time to "change skippers," as one analyst put it.
On Tuesday the $2.1 billion-asset company announced that Mr. Daugherty had resigned as its president and chief executive at the board's request. Patrick J. Rusnak, AmericanWest's chief operating officer, will be the interim president and CEO until a successor is selected.
Calls to Mr. Daugherty were not returned.
Craig D. Eerkes, AmericanWest's chairman, said in an interview Tuesday that asking Mr. Daugherty to leave was "very difficult" but necessary.
"Despite considerable efforts to improve the bank's performance, the board felt that, as a publicly traded company, there needed to be a change in leadership, because targets were not met over multiple quarters," Mr. Eerkes said.
In the second quarter it lost $6.2 million, mainly because its provision increased tenfold from a year earlier, to $16.4 million. In the second quarter of last year it earned $4.7 million. Nonperforming assets more than tripled, to $72.6 million, or 3.44% of total assets.
Mr. Rusnak said in an interview that AmericanWest will embark on a number of initiatives to improve its performance — most critically to raise its capital ratios.
At June 30 its total risk-based capital ratio was 9.68%, and an additional $6.3 million would be required to get that ratio above 10%, he said. AmericanWest had intended to raise up to $34.5 million in a trust-preferred offering, but in May it suspended that plan, citing adverse conditions in the capital markets.
Mr. Rusnak said it has hired Sandler O'Neill & Partners LP to help raise capital, most likely through the equity markets.
In addition, AmericanWest plans to improve capital ratios by shrinking assets and laying off employee to reduce overhead. It is also considering consolidating a number of branches in rural markets and closing others. With 64 branches, "we have a high number of branches relative to our deposit base," he said.
Chris Stulpin, an analyst at D.A. Davidson & Co. in Portland, Ore., said AmericanWest needs to cut costs, because raising capital has become harder. "At this point, anything they can do to shrink the balance sheet, to boost their total risk-based capital level, is necessary."
Under Mr. Daugherty, AmericanWest acquired banks in Washington and Utah, opened five branches, and launched such products and services student checking accounts, home equity lines of credit and remote deposit, Mr. Rusnak said.
Brett Rabatin, an analyst at First Horizon National Corp.'s FTN Midwest Securities Research Corp. in Nashville, said the April 2007 acquisition of the $405 million-asset Far West Bancorp in Provo, Utah, for about $150 million was poorly timed.
"Part of the deal was in cash, and so it crimped their capital ratios a little bit," Mr. Rabatin said. Also, AmericanWest paid close to 2.9 times Far West's tangible book value, "a fairly high price for a company that's not performing as well as they thought they would — the Utah markets, particularly Provo and St. George, are really slowing down, and there's been some slippage in credit quality."
AmericanWest's shares fell 28% Tuesday, to $1.49.
The company also said Tuesday that it has accepted Rick Shamberger's decision to rescind his resignation as its chief credit officer.
