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Do IT this week: Layering
Parent company of bank seeks Chapter 11 protection. Deposits insured by FDIC
By Betty Lin-Fisher
Beacon Journal business writer
POSTED: 07:46 p.m. EST, Dec 01, 2009
The parent company of Cleveland-based AmTrust Bank has filed for bankruptcy protection.
Privately held AmTrust Financial Corp. said it had filed voluntary petitions for Chapter 11 reorganization in Cleveland.
The filing includes the parent company and ''certain of its nonbank subsidiaries,'' the company said.
AmTrust Bank, formerly Ohio Savings Bank, is not included in the bankruptcy filing, bank officials said.
In a news release, the bank said all of AmTrust's 25 branches in Cleveland and Akron as well as 41 branches in Florida and Arizona are ''open for business and servicing its more than 280,000 customers, through its 1,400 employees.''
Bank spokeswoman Donna Winfield said after the news release was issued that the 1,400 figure was for Ohio employees and that the bank has a total of 1,736.
AmTrust's deposits are protected by the Federal Deposit Insurance Corp. (FDIC), which guarantees up to $250,000 per account holder. Individuals or couples could be insured for $1 million or more under certain conditions, including how accounts are titled and how many beneficiaries are named.
AmTrust Corp. said it was filing for court protection to preserve the value of its assets and to maximize returns for AmTrust Financial creditors and other stakeholders.
The bankruptcy filing comes shortly after a regulatory report said AmTrust Bank's already poor financial benchmarks dropped sharply last quarter. That report raised questions about the bank's future.
FDIC officials have said they do not comment on potential bank seizures.
Government regulators told the bank a year ago to improve its finances, and the bank has been trying to raise capital from private investors or the government.
The regulatory report showed that the privately owned bank lost $297 million in the third quarter that ended in September, following losses of $121 million in the second quarter and $65 million in the first quarter.
It also showed that AmTrust saw one key capital ratio fall to 4.2 percent in the third quarter from 7.5 percent in the second quarter. The measure called ''tier-1,'' a risk-based ratio, is 10 to 12 percent for most banks. The FDIC and other regulators consider anything less than 6 percent ''not well capitalized.''
AmTrust, the seventh-largest bank operating in Greater Cleveland, saw deposits decline last quarter, to $8.3 billion from $9.4 billion in the second quarter. The bank has been losing deposits in part because certificates of deposit are maturing and regulators have prohibited it from trying to attract customers by paying overly high interest rates.
The loss of deposits, however, is not the bank's biggest worry. Mounting loan problems are the likely cause of the decline in the bank's capital ratios.
AmTrust has tried to cope the past year in part by cutting costs and selling branches. It sold five in Columbus this year for $21 million.
Bloomberg News reported that the company's filing listed $169.5 million in debt with more than $100 million in assets.
''In the past two years, the debtors have diligently attempted to survive the downturn in the economy,'' AmTrust Chief Executive Officer Peter Goldberg said in court papers. ''Deterioration in mortgage quality and availability slowed the pace of transactions and devalued homes.''
The bankrupt units include AmTrust Real Estate Investment, AmTrust Insurance Agency and AmTrust Properties. The company, with bankrupt and non-bankrupt units, had assets and debt of more than $11 billion each.
AmTrust has sued about a dozen noteholders including Allstate Life Insurance Co. and Midland National Life Insurance Co., seeking the return of $11.8 million in payments made in the 90 days before the bankruptcy filing.
The defendants in the case, which was filed in the bankruptcy court, bought $105 million in debt offerings dated Oct. 20, 2005, according to the complaint.
AmTrust was founded as Ohio Savings Bank in Cleveland in 1889 and expanded into Florida in 1989 under the AmTrust name. It entered Arizona in 2000.
AmTrust is one of the top 15 home-loan originators in the U.S., according to its Web site. The bank invested heavily in single-family home loans, land acquisition, development and construction loans, court papers show.
The bank has been controlled by the Goldberg family since the early 1960s and the family currently owns 77 percent of its common stock, according to the court filing. The holding company was formed in 1977.
AmTrust has 66 branches and more than 280,000 customers, Winfield said.
Betty Lin-Fisher can be reached at 330-996-3724 or blinfisher@thebeaconjournal.com. Bloomberg News contributed to this report.
The parent company of Cleveland-based AmTrust Bank has filed for bankruptcy protection.
Privately held AmTrust Financial Corp. said it had filed voluntary petitions for Chapter 11 reorganization in Cleveland.
The filing includes the parent company and ''certain of its nonbank subsidiaries,'' the company said.
AmTrust Bank, formerly Ohio Savings Bank, is not included in the bankruptcy filing, bank officials said.
In a news release, the bank said all of AmTrust's 25 branches in Cleveland and Akron as well as 41 branches in Florida and Arizona are ''open for business and servicing its more than 280,000 customers, through its 1,400 employees.''
Bank spokeswoman Donna Winfield said after the news release was issued that the 1,400 figure was for Ohio employees and that the bank has a total of 1,736.
AmTrust's deposits are protected by the Federal Deposit Insurance Corp. (FDIC), which guarantees up to $250,000 per account holder. Individuals or couples could be insured for $1 million or more under certain conditions, including how accounts are titled and how many beneficiaries are named.
AmTrust Corp. said it was filing for court protection to preserve the value of its assets and to maximize returns for AmTrust Financial creditors and other stakeholders.
The bankruptcy filing comes shortly after a regulatory report said AmTrust Bank's already poor financial benchmarks dropped sharply last quarter. That report raised questions about the bank's future.
FDIC officials have said they do not comment on potential bank seizures.
Government regulators told the bank a year ago to improve its finances, and the bank has been trying to raise capital from private investors or the government.
The regulatory report showed that the privately owned bank lost $297 million in the third quarter that ended in September, following losses of $121 million in the second quarter and $65 million in the first quarter.
It also showed that AmTrust saw one key capital ratio fall to 4.2 percent in the third quarter from 7.5 percent in the second quarter. The measure called ''tier-1,'' a risk-based ratio, is 10 to 12 percent for most banks. The FDIC and other regulators consider anything less than 6 percent ''not well capitalized.''
AmTrust, the seventh-largest bank operating in Greater Cleveland, saw deposits decline last quarter, to $8.3 billion from $9.4 billion in the second quarter. The bank has been losing deposits in part because certificates of deposit are maturing and regulators have prohibited it from trying to attract customers by paying overly high interest rates.
The loss of deposits, however, is not the bank's biggest worry. Mounting loan problems are the likely cause of the decline in the bank's capital ratios.
AmTrust has tried to cope the past year in part by cutting costs and selling branches. It sold five in Columbus this year for $21 million.
Bloomberg News reported that the company's filing listed $169.5 million in debt with more than $100 million in assets.
''In the past two years, the debtors have diligently attempted to survive the downturn in the economy,'' AmTrust Chief Executive Officer Peter Goldberg said in court papers. ''Deterioration in mortgage quality and availability slowed the pace of transactions and devalued homes.''
The bankrupt units include AmTrust Real Estate Investment, AmTrust Insurance Agency and AmTrust Properties. The company, with bankrupt and non-bankrupt units, had assets and debt of more than $11 billion each.
AmTrust has sued about a dozen noteholders including Allstate Life Insurance Co. and Midland National Life Insurance Co., seeking the return of $11.8 million in payments made in the 90 days before the bankruptcy filing.
The defendants in the case, which was filed in the bankruptcy court, bought $105 million in debt offerings dated Oct. 20, 2005, according to the complaint.
AmTrust was founded as Ohio Savings Bank in Cleveland in 1889 and expanded into Florida in 1989 under the AmTrust name. It entered Arizona in 2000.
AmTrust is one of the top 15 home-loan originators in the U.S., according to its Web site. The bank invested heavily in single-family home loans, land acquisition, development and construction loans, court papers show.
The bank has been controlled by the Goldberg family since the early 1960s and the family currently owns 77 percent of its common stock, according to the court filing. The holding company was formed in 1977.
AmTrust has 66 branches and more than 280,000 customers, Winfield said.
Betty Lin-Fisher can be reached at 330-996-3724 or blinfisher@thebeaconjournal.com. Bloomberg News contributed to this report.
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