July 16, 2008
 
West Virginia Bank on Private List of Those “Troubled”
Bank Successor to First National Keystone
 
By Tony Rutherford
Huntingtonnews.net Reporter
 
Huntington, WV (HNN) – ABC News has uncovered a private consulting firm, Research Associates of America, that unlike the closely held official list of possible bank failures kept by the FDIC, released the names of ten wobbly institutions.
 
The FDIC has a closely held list of 90 banks. Those are staying unknown to the masses, as a slip by a senator likely contributed to the run on the IndyMac bank.
 
However, the private lists compare a bank’s assets and reserves to its non-performing loans. The data was made public in March by the FDIC. Based on the failure of a Texas saving and loan in the 80s, the so-called “Texas Ratio” places those over 100 per cent as most at risk.
 
Ameribank, Inc. in Welch, WV has a score of 153.7 and sits 4th on the list behind Colorado Federal Savings Bank, Easterm Savings Bank, FSB (Maryland) , and Integrity Bank (Ga.). Ironically, Ameribank had been the “healthy” institution that took over the failed First National Bank of Keystone, which was the largest bank failure in the 90s.
 
An internet search reveals that Ameribank has assets of about $24.8 million and deposits of $22.6 million. The State Treasurer’s Office includes Ameribank as one of the “approved state depositories” according to a list from the WV office.
 
Bankingdetail.com does not provide any additional data only that it is “state chartered, a Fed nonmember, and supervised by the FDIC.”
 
However, according to an FDIC website, on September 1, 1999, First National Bank of Keystone, WV with total deposits of $928 million and total assets of $1.1 billion was taken over by the FDIC. Approximately $135 million in local insured deposits and $74 million in assets “assumed by Americibank, Incorporated, Welch , WV.” http://www.fdic.gov/bank/historical/bank/1999/index.html
 
Quoting a press release from the FDIC in 1999, First National Bank of Keystone had $1.1 billion in assets when it was closed Sept. 1, 1999 by the Office of the Comptroller of the Currency and the FDIC was named receiver. At the time of the closing the FDIC announced efforts were underway to find a healthy institution to assume operations. Those efforts were successful when an agreement with Ameribank was reached today (Sept. 7, 1999).
 
“The failed bank's local depositors will automatically become depositors of Ameribank, Incorporated. The failed bank had total deposits of approximately $928 million in 25,434 accounts at the time of its closing. Approximately $135 million in 13,000 local insured deposit accounts are being0Aassumed by Ameribank, Incorporated. The FDIC estimates the failed bank had local uninsured deposits totaling approximately $15 million in approximately 500 accounts.
 
Ameribank, Incorporated, offered to assume the insured local deposits for a discount of $105,000, and is purchasing $74.1 million in assets. The FDIC will retain the remaining assets of the failed bank, and is in the process of estimating the cost of the failure to the Bank Insurance Fund (BIF).”
 
Keystone was the fourth bank failure of 1999.
 
As for Ameribank, it’s parent companies are American Bankshares, Inc. and Ameribank, Inc. A second website states that American Bankshares first incorporated in 1981 and does business as Ameribank. It has an estimated 54 employees.
 
It also operates locations in Palm Beach Garden, Florida; Dillonvale, Ohio; Tittonsville, OH; St. Clairsville, OH; Bradshaw, WV; Iaegar, WV; Northfork, WV; War, WV and Welch. ; https://www.ameribank.com/home.html
 
According to several web postings, the eight branch savings and loan with locations in rural West Virginia and Ohio opened the Palm Beach Garden, Florida branch in 2003. In 2004 it affiliated with a Boca Raton mortgage broker ---- Lending One --- which sold thousands of no-money-down one year home mortgages and renovation loans. Jim Sutton, president of American Bankshares, the holding company for Ameribank, told the Charleston Daily Mail in June 2003 that the “bank was staking its future on wealthy growing Palm Beach County.” He said the survival of the bank depended on the investment in an area where residents had three times the average income of those in McDowell County.
 
Then, Ameribank took an 8 percent cut of the interest (which was 15% plus three to five points at closing). An article quoted David Hartman, Ameribank’s COO in 2003 as stating the company’s decision to buy those loans which ranged from $35,000 to several hundred thousand dollars was “very risky.”
 
Prior to the purchase of those mortgages in Florida, Ohio Louisiana and eight other states, Ameribank had only $800,000 in troubled loans. The bank lost $10.1 million in 2007, including $7.3 million in the fourth quarter. The banks fourth quarter results suddenly had $42 million in troubled loans, or 31% of its $136 million in assets.
 
Lending One had a model of rehabilitating rundown property in urban areas and had been very successful until the housing bubble burst.
 
While the bank has $14.5 million in Palm Beach County deposits (four tenths of one percent), in McDowell County it has 34 percent of the market, or $68.8 million, according to FDIC data.
 
Ironically, if Ameribank should be taken over by the FDIC, it would send shudders back into a county rocked in 1999 by a bank fraud scandal that crushed the impoverished coal mining county of 25,000.
 
In the late 70s, the Keystone Bank only had $17 million in assets, but by the 1990s the Keystone Bank had been one of the top performing banks in the country by buying, packaging and selling sub prime loans on a national basis. It went from $102 million in assets in 1992 to a $1.1 billion behemoth by 1999. Two-thirds of the town’s tax base came from the bank. Residents were both employees and shareholders. The bank invested in the community owning the hardware store, gas station and hotel.
 
The bank first pursued wealthy physicians in the Pittsburgh area. and offered them discount mortgages. To attract more deposits from the Southern WV market, the bank offered new cars in lieu of certificate of deposit interest. The interest went to car dealers who could unload their excess iron.
 
Keystone first purchased Title I loans. Under the FHA Title I loan program, the federal government insured home improvement loans to upgrade the nation’s housing stock. By bundling and re-selling these loans, the bank made a hefty profit forming Keystone Mortgage Corp.
 
The Keystone Bank found the Title One securitizations profitable; in 1996 they b ought and sold $725 million of the loans --- about half in the nation. To offset the loan load, the bank offered depositors internet CD’s with rates two points above the market rate While American Banker named the institution the most profitable in the country for three straight years, the Office of the Comptroller of the Currency saw red flags.
 
As OCC regulators moved in, one of the bank’s directors spewed hatred toward regulators. He hired guards to protect employees from the feds; months later federal marshals appeared to protect the regulators from the bank employees.
 
But the end was near, an old schoolhouse filled with boxes of banking records was emptied when a truck bed. They would be buried in a ten foot trench on a director’s ranch.
 
However, the billion in assets proved a house of cards. First, it only owned $38 million of $553 million in assets, it overstated loan holdings by at least $288 million, and top executives embezzled $25 million in bogus “due diligence” fees r elated to the subprime operations. The proceeds had been funneled into an insider owned shell corporation. But the bank’s mortgage unit which had an out of balance loan portfolio of $12 million , while achieving an 81.35% return on equity, 7.44% return on assets and capital levels of 16%.
 
When Keystone shut down, residents of McDowell County lost both their jobs and savings, as many had more than the $100,000 insured amount. For instance, the retired hardware store manager lost $122,000 from his $222,000 retirement account.
 
For more on the Keystone Bank fraud, click either :
http://www.bankdirector.com/issues/articles.pl?article_id=10077
 
or a Post Gazette story at:
http://www.post-gazette.com/regionstate/19991020knox1.asp
 
Jumping back to Ameribank’s Mortgage Company has been in business since 1906. It has served business and consumer needs for 102 years from its Welch, WV h eadquarters. The site lists branches in Florida, New York, New Jersey, Ohio, Vermont, and Virginia. http://www.ameribankmortgage.com/about.php
 
In fairness to the other banks on the list, the president of Georgia’s Integrity Bank told the Atlanta Constitution that the “Texas Ration” scale is “misleading.” Why? It does not count the bank’s reserves for losses and fails to reflect that the loans are secured with real estate collateral. The CEO of Downey Savings and Loan, Newport Beach, Calif. Has a 96 rating and $13 billion in assets. The CEO called the Texas figure “only a statistic… I don’t think there is any one number you can point to and say that will predict what will happen.
 
Finally, a self-described bank collapse watch contestant list has (in no particular order) several larger and familiar institutions on it including, National City, Sun Trust, Wachovia, Bank of America, and Washington Mutual.