American Sterling Bank - Agency, FHA/VA, Jumbo

Update - 2009-04-22: Reports we have coming in indicate that the remaining retail mortgage staff were let go this past Monday, 2009-04-20. One tipster writes:

"The only retail people they had left (in California) were at the Foothills Ranch office. The San Diego retail branch people left ASB in the beginning of March..."

From another email we received:

"They had a staff of about 20 (sales and ops) remaining and were funding about $20 million per month, mostly FHA."

Based on previous numbers we reported on their wholesale operations, it is estimated that retail production accounted for 10% or more of 2007's average volume of $138 million per month.

Original Listing - 2009-04-17: The Office of Thrift Supervision (OTS) closed American Sterling Bank today, making it the 24th bank to fail so far in 2009. As Receiver, the Federal Deposit Insurance Corp. (FDIC) has "entered into a purchase and assumption agreement" with Metcalf Bank in Lees Summit, MO. From the FDIC's press release:

"As of March 20, 2009, American Sterling Bank had total assets of approximately $181 million and total deposits of $171.9 million. In addition to assuming the failed bank's deposits, Metcalf also agreed to purchase approximately $173.6 million in assets. The FDIC will retain the remaining assets for later disposition."

American Sterling offices in Missouri, California and Arizona will reopen as branches of Metcalf Bank. Total cost to the FDIC was estimated at $42 million, which was reported as the "least costly resolution for the FDIC's Deposit Insurance Fund compared to alternatives."

The Wholesale mortgage operations of American Sterling Bank were previously imploded on 2008-11-02. We will attempt to determine the overall volumes for their retail originations.

Update - 2009-01-15: In a 2009-01-09 8-K filing with the SEC, The Phoenix Companies Inc. (NYSE: PNX) announced it had entered into a non-binding letter of intent to buy American Sterling Bank in conjunction with its application to become a savings and loan holding company and participate in the Fed's Troubled Asset Relief Program (TARP). As noted in the Hartford Courant, Phoenix said "even if it's accepted, there's no guarantee the company will decide to participate in the terms that are offered." A purchase price on the deal was not disclosed.

Original Posting - 2008-11-02: AE's are telling their brokers American Sterling Bank's Wholesale is being shutdown, and the push is on to close out loans in the pipeline. According to one source, locks were quietly being cancelled starting last week, and word only reached staff and the AE's today. Both the Denver and Portland offices are reportedly closed, with only a skeleten crew remaining to wind things up.

We made several calls, and staff members we spoke with gave the impression they were still in the dark about this. But there's nothing ambiguous in this internal memo we obtained:

"Effective on November 3, 2008, American Sterling Bank ("The Bank) has stopped accepting any new wholesale mortgage loan applications. The Bank will continue to process qualified loans submitted prior to November 3rd, but all such loans will have to be funded by November 30, 2008."

A discussion topic has been started on our forums for this latest development. Stay tuned as additional details are still coming.

Original Ailing Listing - 2008-10-09: American Sterling has made quite an effort to keep their heads above water with the OTS, raising over $20.5 million in the past two months as reported by the Orange County Business Journal. But that still leaves the bank shy of the capital needed (7.5% of assets) to comply with the Regulator's orders. Owner and co-CEO Larry Dodge was quoted as saying he plans "to sell assets to further provide capital." The Kansas City Star reported today that co-CEO Michael Thompson said "plans included seeking buyers for some of the bank's loans, perhaps the federal government if the U.S. Treasury Department's proposed $700 billion financial rescue plan finds its way through Congress."

"We may sell them to the government; why not?" Thompson said. "They've essentially become the market for mortgage loans."

Meanwhile, we're hearing Wholesale operations may be shutting down. Brokers tell us American Sterling isn't funding loans: "Hear that they have loans that have closed last week and still haven't funded. Inside source says they are out of money," writes one source. Loans in process are being steered away, per this account:

"Our source told us that we would be best to pull the file and send it elsewhere because they are not funding any loans. We couldn't get hold of any of the folks who we normally work with... this particular person, they told us that everyone was laid off on Friday."

Executive Vice President Brannon Ogburn spoke to us at some length regarding American Sterling's wholesale operations. Ogburn acknowledged there's been quite a bit of downsizing, but said OTS had approved their business plan to include wholesale going forward. Accounting for 90% of their volume in the past, wholesale saw peak volumes around $250 million per month, with 80% of that generated by less than 10% of their Broker base. Over the past nine months, that client base has been purged from 3,500 to between 150 and 300 Brokers, producing around $100 million per month. American Sterling now operates out of two regional offices in Denver, CO and Portland, OR.

We also received this report regarding closure of the Sacramento office on 2008-09-09:

"Tuesday, in a surprise visit, two American Sterling Bank corporate employees showed up at the Sacramento Western Regional Office unannounced to fire all staff... Within one hour all employees had cleaned out their desks, and the office was shuttered. The "New" Western Regional Office is now called the Portland Western Regional Office. Portland has plus or minus 5 ops people left, and a couple of Reps. The 2 real AEs left listed on the rate sheet as contacts are in California."

Given that the "raise or sell" ultimatum from OTS expired on September 30, 2008, it seems American Sterling is caught in a holding pattern revolving around the Fed's plan.

Comments and more information are encouraged.

Update - 2008-08-28: The Office of Thrift Supervision (OTS) issued an Order to Cease and Desist against American Sterling Bank (ASB) on 2008-08-20. The stipulations within present a tall order for the Sugar Creek, MO bank:

• By 2008-08-15, ASB must have and maintain a leveraged ratio of 4.0% and a total risk-based capital ratio of 8.0%. ASB's ratios as of 2008-06-30 were 1.55% and 6.01% respectively.

• By 2008-09-12, ASB must have and maintain a leveraged ratio of 7.5% and a total risk-based capital ratio of 10%. If this stipulation is not met, the Board of Directors must establish a Merger & Sales Committee to oversee the sale or merger of the S&L to/with an FDIC-insured institution or sell substantially all of its assets and liabilities by a binding contracted to be entered into no later than 2008-09-30.

The Holding Company was required to inject $2 million into the bank. Additional capital may have to be raised to meet the September deadline for improving capital ratios. Other areas addressed included compliance with Loans To One Borrower (LTOB) requirements, and the security of information and documents.

Original Entry - 2008-06-18: Based on what we're hearing, American Sterling Bank (ASB) may be working toward a drastic reduction or possible elimination of its wholesale operations.

A broker we spoke with recently described problems with loans locked with ASB. "Hundreds of loans they erased the locks on," the source told us. "Said they mean nothing."

Most of ASB's wholesale offices appear to have been closed. We received the following from a tipster:

"American Sterling Bank just terminated a large % of it's sales and operations force on Friday. They have also significantly divested from several states. In the Portland region, which covers OR, WA, UT, ID, MT, NV, and AZ the list of approved brokers was parried down to below 90 from 480. It was probably 75% region-wide. They only have one AE in Utah ... and none in AZ or NV. Just last week, there were 10 AEs altogether in those states."

"Effective immediately American Sterling will be reducing its Wholesale Centers, all business from Phoenix will have to go through Portland for underwriting, docs, and funding.." - that from an email sent to brokers. Another tipster wrote:

"American Sterling Bank has been slowly / quietly closing branches and laying off operations staff and A.E's over the past 6 months. They have closed their Foothill Branch, Temecula Branch, Chicago Branch, Minnesota Branch, fired all A.E's at their Sacramento branch and this week closed their San Diego fulfillment center laying off all staff and A.E's."

This is not the first we've heard the Sugar Creek, MO based bank was downsizing the division. We are aware of many other lenders that have similarly scaled back operations. From an email sent to us in early April:

"On Friday, April 04, 2008, Arleen Barlow, Regional VP for American Sterling Bank, terminated all Northern California wholesale Account Executives; and further, informed them that American Sterling Bank would be turning the Sacramento Branch into a Retail Origination Office, competing with the very Brokers who had brought them their customers, and their business in the past."

Their broker web site still lists all the above mentioned locations, 15 branches in total and a corporate office in Carefree (Phoenix), AZ. Volume attributable strictly to wholesale is not known, but 2006 originations across their combined wholesale and retail channels is reported at a monthly average of $56.1 million per allmortgagedetail.com.

Visit the ASB thread on our Discussion Forum. Please contact us if you can provide more detailed information about the number of employees who have been affected and recent volume.