US Federal regulators seized AmTrust Bank, a battered Cleveland thrift kept alive this year after local politicians pleaded with the government for a second chance. The bank and its 66 branches was bought by New York Community Bank of Westbury, N.Y. and paid nothing to take over AmTrust's $8 billion in deposits, which indicates AmTrust was essentially worth nothing, analysts said. About 77 percent of the privately-owned bank was held by the Goldberg family, which had controlled it for nearly five decades. AmTrust Bank, which opened with one office 120 years ago on Feb.14, grew to one of the nation's 100 largest banks. AmTrust is the first northeast Ohio bank to fail since TransOhio Federal Savings Bank of Cleveland was seized 17 years ago. Six banks in all failed Friday, bringing the year's total to 130, the highest number of failures since 1992 as regulators intensified their push to rid the industry of weak institutions. With assets of $12 billion, AmTrust was the fourth-largest to fail this year. With home prices falling and commercial real-estate losses mushrooming, AmTrust's finances deteriorated even faster. From March 31 through Sept. 30, AmTrust racked up $418 million in net losses. Its total risk-based capital ratio slumped to 5.44 percent from 9.28 percent, leaving AmTrust far below the 8 percent level needed to be classified as adequately capitalized. AmTrust's deposit base shrank to $8.56 billion at Sept. 30, down 17 percent from six months earlier. The decline raised a red flag for regulators monitoring the bank's finances. The family-owned AmTrust, with $12 billion in assets and roots back to 1889, had been in trouble for more than a year. Like many other banks during the housing bubble, AmTrust barreled into unfamiliar geographic areas with aggressive mortgage and construction lending. Net losses of about $1 billion since last year's second quarter consumed nearly 80 percent of its capital. The Federal Deposit Insurance Corp. said the AmTrust failure was expected to cost its deposit-insurance fund about $2 billion. AmTrust's deterioration over the past year likely resulted in the bank selling for a lower price than it would have fetched if the thrift had been seized earlier, said people familiar with the government-led auction. As part of the deal, the FDIC is shielding New York Community from most losses on $9 billion of AmTrust's assets, the Wall Street Journal reported. Last fall, its primary regulator, the Office of Thrift Supervision, rejected AmTrust's requests for aid through the federal government's Troubled Asset Relief Program. The OTS then slapped AmTrust with a cease-and-desist order, citing “unsafe and unsound banking practices,” and required the thrift shore up its capital, stop making certain loans and rein in the rates being offered for customer deposits.
