After six years in the regulatory penalty box, Ambank maps out future

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Ambank Holdings in Davenport, Iowa, has finally emerged from the wilderness.

The $337 million-asset parent of American Bank & Trust was recently released from a written agreement with the Federal Reserve it had operated under since February 2012, ending 2,155 days of enhanced regulatory supervision.

The company’s executives are eager to make up for that lost time.

CEO Jeff Rose, who joined the company in April 2016, has set an informal goal of reaching $500 million in assets in coming years. To speed things along, he’s mulling a capital raise and possibility buying another bank.

On top of that, Rose says American, which earned $1.1 million in the first nine months of last year, will report a solid profit when it closes the books on 2017. The bank’s expected 0.5% return on assets, while far from stellar, is a major improvement over 2016, when it lost almost $1 million.

The turnaround is a stunning reversal for a bank that not too long ago seemed a likely candidate for closure. American, weighed down by nonperforming loans, lost nearly $24 million from 2008 to 2016, and the written agreement, which triggered more frequent regulatory exams and higher deposit insurance costs, didn’t help.

Ambank's comeback, while grueling, brought a sense of fulfillment to Rose, who has been the CEO at two other Iowa community banks. Rose was looking for a longer-term situation where he could eventually take an ownership stake.

“I wanted to bet on myself,” Rose said. “I wanted a situation where I could turn a bank around, participate in ownership and stay for the long haul.”

Rose said his bet has so far gone better than expected. A return to profitability and the termination of the written order came more quickly than he and the new ownership group anticipated. A transfer of control from the family that had managed the company for decades was finalized in January 2017.

“We knew we had a good year, but things happened earlier than we thought,” Rose said. “We’re very happy with that. There are still challenges, but our position in the community has improved significantly. People are talking about us again.”

Fed officials did not respond to a request for comment.

Ambank spent more time in the penalty box than most banks, industry observers said.

Most institutions operating under regulatory orders work through them in half the time, said Lynn David, president of Community Bank Consulting Services in St. Louis.

“Most banks try to get out within 18 to 24 months,” David said. “The vast majority are out within three years.”

The amount of time spent operating under an order can depend on the offense flagged, the regulator involved and the amount of time, effort and expense required to address the issue.

It took only a year for Ameris Bancorp in Moultrie, Ga., to escape a December 2016 consent order tied to Bank Secrecy Act compliance. BancorpSouth in Tupelo, Miss., hit with a consent order tied to BSA issues in September 2014, was freed from its order in just seven months.

In contrast, it took M&T Bank in Buffalo, N.Y., four years and more than $400 million to address regulators’ concerns about its anti-money-laundering compliance systems. Of course, M&T was set to grow substantially from its then-pending deal for Hudson City Bancorp.

Two other banks freed from written agreements with the Fed last year — Heritage Bank in Topeka, Kan., and Citizens Commerce Bancshares in Versailles, Ky. — had been operating under those orders since 2009.

Ambank's order largely dealt with capital and cash flows. At the time, its bank was coming off a year in which it lost $4.1 million and nonaccrual loans topped $26 million.

Under Rose, the bank is again profitable and nonaccrual loans are down to just $4.7 million.

The key was a basic banking strategy and a commitment to modernizing the bank’s technology. More attention was paid to marketing, and added resources were dedicated to commercial-and-industrial lending.

Management also reduced the time it takes to close mortgages, which still make up about 40% of total loans. The mortgage effort has been so successful that Rose is considering offering Ambank's mortgage origination services to smaller banks and credit unions.

“I think we’re in a position to do that,” Rose said. “It’s very difficult for smaller institutions to maintain that level of infrastructure on their own.”

Plans are in place to rebrand Ambank as it nears its 50th anniversary. Management intends to retire the flying-eagle logo the bank has used for decades. American is also set to replace its “Success Happens Here” tagline with “Together We Can.”

“We’re focusing on ‘I can’ now,” Rose said. “I can buy a house. I can start a business. I can save money. I think it’s a great new brand that will be around a long time.”

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