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Regulators Close AmTrust, Other Banks

WASHINGTON (TheStreet) -- Regulators shut down six banks and thrifts Friday, including AmTrust Bank, a Cleveland thrift that had $12 billion in assets.

The closings bring the 2009 total of failed U.S. banks and thrifts to 130.

TheStreet.com Ratings had previously assigned all six failed institutions E-minus (Very Weak) financial strength ratings.

The Office of Thrift Supervision took over AmTrust Bank and appointed the Federal Deposit Insurance Corp. receiver. The FDIC then arranged for New York Community Bank, the main subsidiary of New York Community Bancorp (NYB), to assume AmTrust's $8 billion in deposits, along with $11 billion in assets, with the FDIC retaining the remaining assets (mainly nonperforming loans and repossessed real estate) for later disposition.

New York Community Bancorp was recently included in TheStreet.com's select list of strong banks paying high dividends.

The failure of AmTrust followed a year of large losses from nonperforming residential and construction loans, which left the institution undercapitalized under regulatory guidelines. The OTS had already made enforcement actions, including issuing a cease-and-desist order in November 2008 that required the institution to raise capital and make management changes.

New York Community paid no premium to the FDIC for AmTrust's deposits, spread across 66 branches in Ohio, Florida and Arizona. The FDIC agreed to share in losses on $6 billion of the acquired assets, and in an unusual twist for the current cycle of bank failures, New York Community Bank granted the FDIC a "cash participant instrument," which would "serve as additional consideration for the transaction." New York Community announced it would provide more details on the transaction Monday morning.

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