RIP: AmTrust in Cleveland (and More Bank Fail Friday Goodness)
WSJ has the post mortem on AmTrust bank in Cleveland, which is appropriate because I just mentioned doing a weekly wrap up on Bank Fail Friday banks here on JDA. I try to do what I can for our little BFF movement, so maybe that'll help.
Federal regulators on Friday seized AmTrust Bank, a battered Cleveland thrift kept alive this year after local politicians pleaded with the government for a second chance.
AmTrust is the fourth-largest U.S. bank or savings institution to fail so far this year. A total of 130 lenders have collapsed in 2009, the highest number of failures since 1992 as regulators intensified their push to rid the industry of weak institutions.
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% of its capital.
New York Community Bancorp Inc., Westbury, N.Y., is acquiring AmTrust and its 66 branches. The purchase is a dramatic expansion for New York Community, which runs a handful of banks in New York and New Jersey. The company has made seven acquisitions since 2000, none of them outside the New York City metropolitan area, where it has about 212 branches.
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.
Meanwhile, the FDIC is still broke. In case you didn't know.