Still in a capital pinch, AmTrust Financial Corp. of Cleveland is selling more of its Ohio branches.

First Place Financial Corp. of Warren, Ohio, announced Wednesday that it has agreed to buy AmTrust's three branches in Lake County, along with $225 million of deposits and $160 million of mortgages.

First Place would pay a 3% deposit premium, or $6.75 million.

This is the second branch deal this year for the $14.4 billion-asset AmTrust, which has 65 branches in three states.

AmTrust would not say how much closer it is to satisfying the elevated capital requirements imposed by regulators. In the first quarter it also reduced its assets by 17% from the start of the year.

Still, observers said more branch sales are likely for AmTrust.

Jerry Swords, the president of Swords Associates Inc., a bank consulting firm in Kansas City, Mo., said he has advised struggling clients to unload what they can.

"You need capital, so you sell assets," Swords said. "And you keep selling, keep going, and each time you hope to come away with a nice little profit that will get you closer to your goal."

AmTrust has been trying to boost its capital since late last year, when the Office of Thrift Supervision imposed a cease-and-desist order requiring its bank unit to have a leverage ratio of 7% and a total risk-based capital ratio of 12%.

But loan trouble has continued to erode its capital.

At March 31 the bank had a leverage ratio of 4.82% and a total risk-based capital ratio of 9.28%, according to data from the Federal Deposit Insurance Corp.

It posted a $64.5 million first-quarter loss, after reporting an $8.4 million profit in last year's first quarter, the data showed. And noncurrent loans made up 13.29% of its total loans.

Theodore Kovaleff, the bank and thrift analyst at Broad Street Securities in Plantation, Fla., said AmTrust has to jettison branches because it has little hope of finding investors to plug its capital hole.

"Any kind of trip to Wall Street for them is not going to be a pleasant experience," said Kovaleff, who happens to be a First Place stockholder. "With each of these branch sale deals, they get one step closer to getting to that 12%."

WesBanco Inc. of Wheeling, V.Va., said in January that it had agreed to buy five AmTrust branches in Columbus, Ohio, along with $601 million of deposits. WesBanco is to pay a 3.5% deposit premium, or $20.9 million.

The First Place and WesBanco deals would leave AmTrust with 26 branches in Ohio. The rest are in Florida and Arizona.

By acquiring the branches the $3.4 billion-asset First Place would have its first operations in the eastern Cleveland suburbs, an area it has long coveted and where it already has mortgage customers.

"It fulfills a branching goal of ours," Steven R. Lewis, First Place's president and chief executive officer, said in an interview. "Given the pricing, it was hard to pass up."

Lewis said the loan pool his company is buying from AmTrust consists entirely of performing mortgages in 31 states, including a high number of conforming adjustable-rate mortgages.

"We did an enormous amount of due diligence," Lewis said. "We didn't take anything with any deterioration or blemishes."

Lewis said the deal, which is expected to close next quarter, is an example of the company's use of its $73 million of capital from the Treasury Department's Troubled Asset Relief Program to grow. He said it channeled half of the Tarp money to its bank unit but is holding on to the other half so it can do deals like the one with AmTrust.

"We want to be able to take advantage of the market opportunities," Lewis said.

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