New York Community Bank Accuses AmTrust Financial Of Ulterior Motives In Real Estate Sale

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August 24, 2010

THE STORM CENTER

579 words

New York Community Bank accuses AmTrust Financial of ulterior motives in real estate sale

Tim Zawacki

Amid an ongoing stabilization plan involving former AmTrust Bank branches, New York Community Bank objected to the former AmTrust Financial's efforts to sell property to another, competing financial institution.

New York Community Bancorp Inc. unit New York Community Bank on Aug. 20 objected to the attempt of the company formerly known as AmTrust Financial Corp. to engage in the bankruptcy court-supervised sale of a parcel of land and the improvements thereon located in Beachwood, Ohio, to Pittsburgh-based Dollar Bank Federal Savings Bank.

New York Community Bank, which acquired a large portion of the banking operations of AmTrust Bank upon its December 2009 failure, said that it offered $1.7 million in February for the real property that AmTrust Financial is now seeking to sell to Dollar Bank for $2.5 million. New York Community Bank is a tenant operating a branch on the property at issue, which it rebranded earlier this year to the Ohio Savings Bank name. AmTrust Financial filed for bankruptcy protection in November 2009 and now operates as AmFin Financial.

According to New York Community Bank, the branch is a longstanding, highly visible location that is located "in the heart of one of Cleveland's busiest business and banking areas" and is "critical to NYCB's efforts to compete in this market and serve its customers." As such, the bank alleged in court documents, "NYCB believes that the sale motion may be an attempt by the debtors to deprive it of its ability to operate a bank branch at this important location. The proposed purchaser is not a traditional real estate investor, but rather another bank." New York Community Bank on April 28 assumed the branch lease, which is scheduled to expire in February 2014.

Deposit market share data reported by SNL indicates that Dollar Bank ranked ninth in Cuyahoga County, Ohio, with June 30, 2009, in-market deposits of $1.2 billion. AmTrust Financial had slipped to sixth from fourth in the county between June 30, 2008, and the same date in 2009, with deposits of $2.67 billion down from $4.23 billion. SNL's branch data indicate that the Beachwood branch at issue on Chagrin Boulevard had total deposits of $88.4 million as of June 30, 2009, down 15.1% from 2008.

New York Community Bank said its purchase and assumption agreement with the FDIC requires it to continue the operations of the former AmTrust Bank in the region for at least a year. And, it argued, the AmTrust Financial sale motion failed to describe the treatment intended for the lease.

"Any attempt to force NYCB out of the location or even begin the lengthy process of closing a branch will interfere with NYCB's ability to satisfy this obligation and send the wrong message to its customer base in the area," the bank alleged. "The closing of a bank branch is an onerous task, subject to governmental regulation and practical limitations. ... The debtors should not be permitted to frustrate or interfere with NYCB's obligations to the customers and community it serves or the purpose and policy supporting the FDIC's sale to NYCB."

As it stands, New York Community Bank said, it has preserved more than 1,400 jobs and "continued to work at every level" to stabilize its new Ohio branches.

"Although nine months have passed, and immense progress has been made, NYCB's work is far from over," it said.

The FDIC filed a limited objection to the sale motion, but its concerns do not relate to the New York Community Bank lease. Rather, the FDIC is seeking assurances that sale proceeds will go to the benefit of the bankruptcy estate, not that of the holders of AmTrust Financial's 11.78% senior notes. The FDIC said it does not object to the sale itself.

August 30, 2010