AmTrust Bank - Retail, Wholesale

Update - 2009-12-03: AmTrust Financial Corp. -- the parent company of AmTrust Bank -- filed for Chapter 11 bankruptcy protection on 2009-11-30. Reuters reported that AmTrust Bank "was not included in the filing and will continue business operations" which was confirmed when we called the bank's Cleveland, OH mortgage operations.

Calculated Risk noted this as a "somewhat unusual move," citing other sources that implied this may have been a "pre-emptive move" on the part of the holding company and could be a lead-in to direct intervention by federal regulators.

Update - 2009-11-18: Another quarter ended, and AmTrust Bank's ratios have only gotten worse. According to the Cleveland Plain Dealer, the bank's "already poor financial ratios dropped nearly in half last quarter." A $297 million loss for the period ending 2009-09-30 eclipsed the $127 million loss reported for the previous quarter.

"The Cleveland bank, which a year ago was ordered to improve its finances, saw its key tier-1 risk-based capital ratio fall to 4.2 percent, down from 7.5 percent in the second quarter."

AmTrust Bank's tier-1 core ratio fell to 2.5 percent from 5.4. Measure of total risk-based capital fell to 5.4 percent, a 3.4 percent move away from the 12 percent the Office of Thrift Supervision had set a deadline of 2008-12-31 to meet.

Update - 2009-08-17: Dropping further from meeting regulatory capital requirements, AmTrust Bank posted a second quarter loss of $120.9 million -- nearly double the $64.6 million hit taken in the first quarter. As of 2009-06-30, the bank's Tier-1 core capital ratio had fallen to 4.29 percent from 4.82 percent on 2009-03-31. The risk-based capital ratio slid to 8.51 percent from 9.28 percent. Both ratios are drastically short of those required by the Office of Thrift Supervision, whose deadline is now more than seven months past. From the South Florida Business Journal:

"Even though the bank decreased its total assets to $13.1 billion from $14.4 billion as of March 31 to aid the bottom half of its capital-to-asset ratio, the $120.9 million loss eroded its capital faster than the bank could shrink its assets."

According to the article, nearly 18 percent of AmTrust's assets were non-performing. Along with repossessed property, that includes $1.23 billion in noncurrent mortgage loans.

Update - 2009-05-18: The opening paragraph in The Plain Dealer's article on Friday, 2009-05-15, pretty much sums it up:

"Six months after AmTrust Bank was ordered to improve its finances, the Cleveland bank's numbers are actually getting worse, according to a report filed Friday."

Not only has AmTrust Bank fallen short of the OTS' mandate to improve ratios to 7% and 12% respectively for it's Tier-1 core capital and total risk-based capital levels -- a target the bank previously failed to meet by the regulator's 2008-12-31 deadline -- the 2009 1st Quarter results filed Friday indicate they have continued to drop since September 2008, falling to 9.8% and 9.3% since December.

""I can't predict what action the OTS may or may not take in response" to the financial report, OTS spokesman William Ruberry said Friday."

Despite the declining ratios and a $65 million first quarter loss, AmTrust continues to report progress in the execution of it's turn-around plan. Spokesperson Donna Winfield gave The Plain Dealer this written statement:

""For example," she said, "our regulatory capital ratios were ahead of plan though they remain under pressure for the foreseeable future as we work through our risky assets," adding that losses in the quarter "narrowed significantly," assets were reduced consistent with the bank's strategy to reduce risk and nearly $8.5 billion of new single-family loans were originated, making AmTrust the third-largest wholesale lender in the nation."

Update - 2009-02-13: The 2008 year-end reports for AmTrust Bank are in, and the bank failed to meet the capitalization requirements of OTS. AmTrust's Tier 1 (core) capital ratio as of December 31, 2008 was reported at 4.95% and its risk-based capital ratio was 9.99%, significantly less than the respective 7% and 12% ratios regulators had demanded. "That means AmTrust is just adequately capitalized," reported the Triangle Business Journal, "the bank needs to raise capital."

Also today, 90.3 WCPN reported a class-action lawsuit has been filed against AmTrust on behalf of customers whose Home Equity lines of credit were allegedly suspended "without warning or any assesment of individual property values." The suit contends customers were charged fees "for access to the credit should they need to tap it" and seeks their recovery "plus costs incurred resulting from the suspensions."

Update - 2009-01-26: In a 2009-01-24 press release, West Virginia based WesBanco announced it will buy Amtrust's five banking branches in Columbus, OH for $20.9 million. The transaction provides Amtrust with much needed capital toward meeting OTS's requirements, but "does not include the purchase of any troubled AmTrust mortgage loans."

Update - 2009-01-09: Cleveland's Plain Dealer reported on 2009-01-06 that Amtrust has submitted its "turnaround" plan to OTS, citing spokesperson Donna Winfield:

"We ... expect to meet with them after they have had an opportunity to review it," she said in a prepared statement. "At this time, it's not appropriate to comment on the specific details of the plan except to say we have confidence in our ability to execute on it."

Original Ailing Listing - 2008-12-26: We have learned that AmTrust AE's were told in a conference call on Monday, December 22, 2008 that loan locks were being suspended "with new locks to resume after 1/1/2009." Given the bank's year-end deadline to conform to regulatory orders, this could be an ominous development as pertains to AmTrust's wholesale operations.

Privately-owned AmTrust Bank of Cleveland, OH is working to meet regulators' demands after it was issued a Cease & Desist Order by the Office of Thrift Supervision (OTS) on November 19, 2008. Under the order, AmTrust must increase it's Tier 1 (core) capital ratio to 7%, and its risk-based capital ratio to 12% by December 31, 2008. The bank was also ordered to limit new loans for land acquisition, development or speculative residential construction.

On December 18, 2008, the bank announced it would be closing its downtown Akron office on March 13, 2009, and told the Akron Beacon Journal "no more layoffs planned." AmTrust employed about 2700 people, 1800 in Ohio. News of recent layoffs has been mixed, with one tipster reporting 400 layoffs, another saying "over 500 let go," while a report on Cleveland.com indicates "200 to 300" jobs were cut.

In an article published December 1, 2008, Crain's Cleveland Business summarizes the conditions Amtrust Bank has to meet:

Technically, she [Karen Dorway, president of bank rating and research firm Bauer Financial] said, the bank is still well-capitalized. But AmTrust's high level of nonperforming assets and the precarious economy mean regulators are uncomfortable with the current levels: The bank's nonperforming loans were above 7% of its total assets as of Sept. 30, Ms. Dorway said -- well above acceptable standards of closer to 1%."

The article called it a "surmountable challenge," likening AmTrust's situation to that of another northern Ohio bank, The Home Savings and Loan Co. in Youngstown, OH, which received a similar order from OTS. Crain's has this quote from Home S&L's chairman and CEO Douglas McKay:

"I think regulators know they (AmTrust officials) can get out of it," Mr. McKay said. "That's why they issue orders. When they don't think you can get out of it, they shut you down completely."

According to Cleveland.com, AmTrust is the "fourth-largest bank in the region by deposits" in northern Ohio, and "one of the 15 largest mortgage lenders nationwide." The bank saw 2007 volume average nearly $1.9 billion per month.

AmTrust previously announced the end of its offering of Closed-End Second Mortgages as of October 3, 2008, which we reported in a member newsletter (subscription required). As noted by our source, they were "one of the last lenders to pull 2nd mortgages."

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