Regulators hit AmTrust bank with lending restrictions

 11/27/2008
Federal regulators have issued a cease & desist order against Cleveland-based AmTrust Bank – one of the largest lenders and deposit holders in South Florida – placing restrictions on its commercial real estate lending.

The order prevents AmTrust from making new loans on land acquisition or development and speculative residential construction. That could spell trouble for developers holding a first mortgage with AmTrust who were counting on a future advance for construction funding.

The Office of Thrift Supervision said the bank must develop a remediation plan for those loans in excess of $25 million that were deemed problematic during an internal audit. The remediation plans must determine the best prospects for repayment.

AmTrust also must revise its policy on setting aside a proper level of reserves to cover noncurrent loans.

As of June 30, AmTrust had the seventh-largest deposit network in South Florida, with $5.3 billion in deposits in 19 branches. Yet, it’s been hit hard by troubled land development loans in South Florida, including a series of foreclosures seeking tens of millions of dollars against Boca Raton-based EB Developers.

AmTrust’s $890.2 million in noncurrent loans represented 7.5 percent of its lending portfolio on Sept. 30, according to Federal Deposit Insurance Corp. data. The bank held $260.5 million in repossessed property. It lost $305.7 million in the third quarter.

The order also gave AmTrust until Dec. 31 to raise its tier-1 core capital ratio to 7 percent and its risk-based capital ratio to 12 percent. As of Sept. 30, those ratios were 5.4 percent and 10.55 percent, respectively.

 Source:http://www.bizjournals.com/southflorida/stories