Once a shining newcomer to the Oregon banking scene, PremierWest's days are numbered.
AmericanWest Bank of Spokane said Tuesday it has made a $16.6 million deal to acquire PremierWest Bancorp and the holding company's PremierWest Bank — the largest of two community banks based in Medford.
May 2000: PremierWest Bank created through the merger of the Bank of Southern Oregon and Douglas National Bank
April 2001: PremierWest Bancorp acquires Timberline Community Bank in Siskiyou County
January 2004: PremierWest acquires Mid Valley Bank in the Northern California
January 2008: PremierWest acquires Stockman's Financial Group in the Sacramento area.
June 2012: PremierWest sells two branch offices to Pacific Crest Federal Credit Union
October 2012: AmericanWest Bank says it will acquire PremierWest Bank; the combined company will be known as AmericanWest Bank
PremierWest Bank's singular blue star and stripes has been a familiar banking symbol in the Rogue Valley for the past 12 years. But the bank has struggled since the real estate bubble burst six years ago, suffering through four years of losses before turning a modest $114,000 third-quarter profit this year.
"We've been looking at our capital needs and strategic options for two solid years, but not specifically this one until recently," said Jim Ford, president and chief executive officer of PremierWest Bank.
PremierWest saw many of its major clients default when their developments in Oregon and California failed during the Great Recession.
After it received a $41.4 million Troubled Asset Relief Program of infusion from the U.S. Treasury Department in February 2009, PremierWest raised $33 million in early 2010. (Correction: The amount raised in 2010 has been corrected in this story.)
But the local institution still needed more cash to satisfy regulators and increase its ability to compete.
"It became evident to the board of directors and our bank management that without a sizable infusion of additional capital, the bank would not be able to exit all problem credit relationships, satisfy our commitment to the TARP program, and adhere to recently enacted regulatory requirements," Ford said.
AmericanWest has double the assets of PremierWest — $2.4 billion as of July 2 versus PremierWest Bank's $1.2 billion as of Sept. 30. By the end of the week, AmericanWest will employ more than 800 people at 80 branches, while PremierWest has a staff of 400 people and 32 offices. The deal requires regulatory and PremierWest shareholder approval. Closing is expected in the first half of 2013.
Ford said AmericanWest will pay off the Medford bank's TARP debt just before the deal closes.
Given the upheavals in the banking industry, states such as Oregon and California are less likely to issue new charters for existing banks to enter their boundaries.
"You have to buy a bank," said Scott Kisting, chairman and chief executive officer of AmericanWest.
Kisting said AmericanWest and PremierWest will complement one another in terms of geography, products and community engagement.
While the banks share similar cultures, they have headed in different directions in recent times.
AmericanWest's predecessor opened shop as United Security Bank in Chewelah, Wash., in 1974. A few small banks merged in that region, creating AmericanWest in 1999. That was the same time John Anhorn and Rich Hieb were fashioning a deal that would turn Bank of Southern Oregon and Douglas National Bank into PremierWest Bank in May 2000.
PremierWest, which had a stated goal of capturing 10 percent of the market between Eugene and Sacramento, saw opportunity through acquisition of community banks along Interstate 5.
PremierWest ventured just across the California state line into California with its $14 million acquisition of Yreka-based Timberline Community Bank, and in 2004 snagged Mid Valley Bank of Red Bluff, Calif., with five branches for $25.7 million in 2004. In January 2008, PremierWest closed an $88.5 million deal on Elk Grove, Calif.-based Stockman's Financial Group and added two former Wachovia branches from Wells Fargo in Northern California in July 2009.
But the economic downturn hit Southern Oregon and Northern California hard, and mounting losses forced PremierWest to unwind some of its expansion efforts. In the first half of this year, it closed nine unproductive branches and sold two more to Pacific Crest Federal Credit Union.
AmericanWest also languished before SKBHC Holdings, led by Kisting, purchased it out of U.S. Bankruptcy Court for the Eastern District of Washington for $6.5 million. Since then, the private equity group — which raised $750 million — has gone on a spending spree, buying up troubled banks.
In less than two years, AmericanWest has snapped up Bank of the Northwest in Bellevue, Wash., Sunrise Bank of San Diego, Viking Bank of Seattle, Security Business Bank of San Diego, and Inland Community Bank of Ontario, Calif. The bank operates in California, Idaho, Utah and Washington.
Kistling said the deal with PremierWest will add strength to the bank and also give the community a stronger bank with greater lending capabilities.
"We still have a third of our capital to deploy and our investors are happy how we've deployed our capital and with the bank we're building," said Kisting, who has offices in Seattle and Spokane. "When you have a very-well capitalized bank, you free up people to do a larger amount of lending."
So when AmericanWest came calling, it found a receptive audience at PremierWest.
"PremierWest was looking for loans in all the wrong places," said Ken Thomas, a banking expert and economist in Miami. "When you look at the two banks you're looking at the traditional rabbit and tortoise. One guy was slow and taking his time and another was running quickly and picked the worst possible time for expansion."
Thomas, who has tracked community banks for decades, said despite the stumbles, PremierWest ultimately worked out a good deal for itself in an environment when many banks have been closed by regulators.
"Current management did well in the sense this wasn't a Friday night take-over scenario." Thomas said. "That's the alternative to turning over management to the FDIC."
Kisting said he was drawn to PremierWest's management as well as access to Oregon and Northern California markets.
Mike Sickels, chairman and retired CEO of People's Bank of Commerce, in 1998 helped start what now will become the only Medford-based bank.
"A a community banker, it's sad to see the local ones go away," Sickels said. "But you have to think it presents an opportunity for people like ourselves."
With Washington Federal's acquisition of South Valley Bank & Trust earlier this year, 14 banks remain in Jackson County.
"The industry does a good job of filling in where the opportunities exist," Sickels said. "Those who remain offer a good service to customers."
When a stronger institution buys one that has been down a bumpy road, it can be a relief to the rank and file.
"A strong player portends well for them," he said. "It gives them a stronger future."
Reach reporter Greg Stiles at 541-776-4463 or e-mail firstname.lastname@example.org.