New AmericanWest Buyout Aimed at Expanding Southern California Footprint

Two weeks after buying a San Diego-area bank, AmericanWest Bank in Spokane, Wash., has another deal in Southern California.

The $2.5 billion-asset bank announced Thursday it has agreed to acquire Inland Community Bank (ICBN) in the greater Los Angeles area, for $23.7 million in cash. The price tag is 95% of the book value of Inland and its holding company, ICB Financial.

Scott Kisting, the chairman and chief executive of AmericanWest, said in an interview that he was attracted to the $221 million-asset Inland based in Ontario, Calif., because of its commercial business and its demand deposits. Its commercial and industrial loans and owner-occupied real estate accounted for half of its loans, and demand deposits made up 32% of its deposits, at the end of the first quarter, according to Federal Deposit Insurance Corp. data.

"All of the banks we've acquired have been religiously attached to demand deposits," Kisting said. Having that level of demand deposits "makes you a much stronger bank; 30% is high for a community bank."

AmericanWest has looked at 50 to 60 banks in the last couple of years, but has only gotten serious about 15 of them, Kisting said.

Inland started weighing its options about two years ago, Chief Executive James S. Cooper said. As he saw it, the bank had two options: find a buyer, or dilute its shareholders by raising capital so that it could fight its way to $700 million in assets, a size that improves community banks' chances of surviving in the new regulatory environment.

"If we did raise the capital, we would then get to compete with the Scott Kistings of the world," Cooper said.

A regulatory matter hamstrung Inland's pursuit of a partner. The FDIC tried to assess a cross-guarantee claim on the bank for the 2009 failure of Progress Bank of Florida in Tampa. The banks shared private-equity investors and directors, but were not owned by the same holding company.

The FDIC wanted $5.6 million from Inland Community, but a $500,000 settlement was reached in October 2011.

"We've received numerous inquiries and interest in our bank," Cooper said. "But there was nothing we could do for about 14 months."

The deal, which is expected to close in the fourth quarter, would broaden AmericanWest's coverage of Southern California. Through the 2011 acquisition of Sunrise Bank in San Diego and the acquisition of Security Business Bank of San Diego, which closed on July 2, the bank has eight branches in San Diego and Riverside counties. The Inland Community transaction would add five branches in Los Angeles and San Bernardino counties.

It still would have a gap in Orange County, a highly coveted market. Kisting wants to be there but says he is looking for the right opportunity.

"We don't do M&A just to do it," Kisting said. "It has to fit in."

Filling in the gap in Southern California will not take precedence over finding deals in the Pacific Northwest or in Utah, where it has branches in Salt Lake City and Provo, he said.

AmericanWest has cash to spend, too. The bank's holding company, SKBHC Holdings, raised $750 million in late 2010 to buy the then $1.6 billion-asset AmericanWest Bank in an auction held by the U.S. Bankruptcy Court for the Eastern District of Washington. It paid $6.5 million for the bank and infused it with $185 million to recapitalize it.

AmericanWest still has $365 million in capital to spend, Kisting said. His plan is to build a $12 billion-asset bank within the next five years.

In addition to its two acquisitions in California, AmericanWest bought the $146 million-asset Bank of the Northwest in Bellevue, Wash., and the $406 million-asset Viking Financial Services in Seattle in 2011.