Amtrust Bank - Retail, Wholesale

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 McKaye:

"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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