Georgia bank is tenth to fall

The tenth bank failure in the USA, that of Integrity Bank of Georgia, is hailed as an indication of the continuing problems in the USA real estate market, such was the influence of that market on the banks downfall.

The Regions Bank, an Alabama concern, has taken on all of the Integrity Bank’s deposits – 23,000 accounts totalling $974 million – and a large proportion of its assets.

The FDIC is estimating that the failure of the Georgia bank will sting the insurance fund for between $250 and $350 million and is holding on to the remainder of the assets not taken by Regions Bank.
    

Real estate specialist

Integrity Bank was a specialist in real estate, concentrating on lending in the Atlanta area and basing much of it’s business, which opened in 2000, on what it called a ‘faith based’ culture. The boom in the housing market that typified the early years of the 21st century enabled the bank to capitalise on the market, and it soon reached the heights of a billion dollar outfit, trading on the stock exchange.

The recent fall in the housing market has led to the downfall of the bank in spectacular style.

Fired Chief Executive

Integrity Bank took steps to try and turn the downturn around by first firing the chief executive in the summer of 2007, and by employing an expert in company turnaround as a replacement. It voluntarily stood down from the Nasdaq earlier this year, a situation instigated after Nasdaq threatened the delisting of the bank thanks to sub standard reporting practices.

Integrity Bank’s loans portfolio was made up of over 76 percent in terms of construction loans, a situation that was hardly ideal when the housing market began to falter, and the bank registered a net loss in the second quarter of this year totalling over $33 million.

Branches of Integrity in Atlanta – five in total – will reopen on Tuesday as branches of Regions Bank, the 18th largest in the US market.

Bank failure rates in the USA have rocketed in 2008, with mortgage defaulting and the growing problems in the financial and housing markets held responsible. California lender IndyMac Bancorp Inc fell with $32 billion of assets in July, the largest in the history of banking in the USA.

Data issued by the FDIC shows 117 banks considered as ‘troubled’ – a level not seen for half a decade – a rise of 27 since the reports in the opening quarter of the year, and profits in banks have fallen by over 85 percent in the second quarter.