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The Mortgage Graveyard
Failed, closed and a c q u i r e d mortgage-related entities.

No. 12 Shut Down

OTS closes Ameribank Inc.

September 22, 2008

By staff

A federal savings bank based in West Virginia has become the 12th institution to fail this year, with risky construction loans at the center of its collapse. A mortgage subsidiary was marketing no-documentation loans as recently as May.

Ameribank Inc. was shut down on Friday, a notice Friday from the Office of Thrift Supervision said. The Federal Deposit Insurance Corporation has been appointed as receiver.

The Northfork, W.V.-based company had four consecutive quarters of losses and capital erosion through June 30, OTS said.

"Ameribank was 'critically undercapitalized' and the institution was unable to develop a viable plan to restore capital to adequate levels," OTS said it determined. "Ameribank's troubles stemmed from excessive growth in construction rehabilitation loans, which provided financing for the rehabilitation of distressed properties, predominantly in low- to moderate-income housing markets."

OTS said it issued an enforcement letter restricting rehabilitation loans in May 2007 when the regulator began a continuous on-site presence at the institution. A cease-and-desist order was issued against Ameribank in October 2007 because the firm was still not in compliance with the enforcement letter.

The thrift was founded in 1906 and converted from a state-chartered commercial bank to a federally chartered savings bank in 1997. The 63-employee institution had total assets of $115 million and total deposits of $102 million as of June 30.

Ameribank was parent to operating subsidiary Ameribank Mortgage Company LLC, based in Williston, Vt. As recently as May, the mortgage unit touted stated-income, stated-asset loans up to 80 percent loan-to-value on borrowers with 680 credit scores. It also marketed 75 percent LTV non-owner occupied programs as well as FHA programs with up to 50 percent debt-to-income ratios, mortgage lates and chapter 13 bankruptcy buyouts.

In the May statement, Ameribank Mortgage claimed to be "one of the fastest growing mortgage companies in the United States." The company did not immediately respond to a request for details about the fate of the mortgage unit.

Deposits of the bank's West Virginia branches have been transferred to Pioneer Community Bank Inc. for a 2.0 percent premium, while Ohio branch deposits have been transferred to The Citizens Savings Bank, Martins Ferry, Ohio, for a 1.1 percent premium, according an FDIC press release.

"Pioneer Community Bank, Inc., and The Citizen's Saving Banks' acquisition of all deposits was the 'least costly' resolution for the Deposit Insurance Fund compared to all alternatives because the expected losses to uninsured depositors were fully covered by the premium paid for the banks' franchises," the FDIC said.

Pioneer and Citizens will also be purchasing $23 million in assets.

The FDIC estimates the collapse will cost its Deposit Insurance Fund an estimated $42 million.

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