Regulators shut down Integrity Bank

The Federal Deposit Insurance Corp. and state regulators on Friday shut down Integrity Bank, a troubled local lender hurt by the real estate crisis.

Birmingham-based Regions Financial will acquire Integrity’s $974 million in deposits, the FDIC said. Integrity customers will have access to their accounts and no interruption of service is expected, the FDIC said. Integrity’s five branch offices will reopen Tuesday as Regions offices, and customers can continue to use those locations, the FDIC said.

However, the matter may not be over. The FBI, which investigates possible financial crimes, is looking into the situation, said agency spokesman Stephen Emmett. The “FBI is working with the FDIC” on the case, but it “is not prepared to discuss Integrity Bank at this time,” he said.

The Alpharetta-based bank, which opened its doors in 2000 with a Christian-oriented philosophy, is the 10th U.S. bank to fail this year and the second Georgia institution to fail in 12 months.

As ranked by its total assets of $1.1 billion, Integrity becomes the third-largest bank failure in Georgia history.

Integrity fell on hard times over the last year after its strategy of funding construction in Atlanta’s booming northern suburbs backfired amid the real estate downturn. In June, Integrity topped a list of 25 troubled banks across the country published by research firm SNL Securities.

Eight other Georgia banks were on that list, and experts have said more failures in metro Atlanta and the state are possible as home values fall and builders and other borrowers default on loans.

The FDIC said Regions has agreed to pay a premium of 1.012 percent on Integrity’s deposits. It also will purchase about $34.4 million of Integrity’s assets, mostly cash and cash equivalents.

“We acquired all deposits insured and uninsured,” Bill Linginfelter, Regions’ top executive for Atlanta and North Georgia, said late Friday. “Their deposits are completely safe.”

Business as usual

Customers will continue to have access to their accounts online and use their checks and ATM cards as normal. “None of that has been restricted,” he said. “They can just operate as they have before.”

Regions has 108 branches in metro Atlanta and North Georgia. The bank has about $5.5 billion in total Georgia deposits.

Linginfelter said the Integrity deal helps satisfy its growth strategy in north metro Atlanta.

Integrity is the second financial services firm with a Christian theme to soar at one point only to crash and burn. HomeBanc Mortgage Corp. last year sought bankruptcy protection after it ran out of money.

Integrity’s employees regularly prayed before meetings or in branch lobbies with customers, while the bank gave 10 percent of its net income to charities.

“We felt if we prayed and obeyed God’s word and did what He asked, that He would help us be successful,” bank founder Steve Skow told The Atlanta Journal-Constitution in 2005.

The bank —- the 13th-largest bank based in Georgia in terms of assets —- promoted itself as a place with better customer service than giant, impersonal financial institutions, and grew to five branches —- Alpharetta, Roswell, Vinings, Duluth and south Forsyth County.

Patrick Frawley, a former bank regulator, was hired in September to try and turn around the bank. But not enough capital could be raised to cover the bad loans.

On Friday, The Wall Street Journal reported that state and federal officials were investigating Integrity for lending $83 million to a single developer in South Florida, a staggeringly large gamble given the bank’s relatively limited capital reserves.

The company’s stock, which trades over the counter, has been hammered, losing almost all of its value in the last year. Shares closed Friday at 4 cents.

In an interview with the Journal-Constitution this summer, Frawley said the bank had overhauled its management team and had been working closely with regulators at the FDIC and the Georgia Department of Banking and Finance to improve its operations.

“We’ve got a very good working relationship with the regulators,” he said in the interview.

“We are hopeful that we will eventually find an acceptable solution.”

‘Too severe to overcome’

Robert M. Braswell, commissioner of the Georgia Department of Banking and Finance, praised Frawley for pulling out all the stops to try and rescue the bank. “But unfortunately, the problems were too severe to overcome,” he said.

“These are challenging times for banks throughout the country,” he said. “However, it’s important to note that the vast majority of banks in Georgia remain on solid footing. Each bank’s financial stability should be evaluated on its own merits.”

Joe Brannen, president of the Georgia Bankers Association, cautioned not to make too much out of Integrity’s failure. The vast majority of state banks are profitable and well-capitalized, he said.

“I don’t want to minimize the turbulence of the banking market in Georgia, but I don’t know that this is a sign of things to come,” he said.

Staff writer Rhonda Cook and news researcher Sharon Gaus contributed to this article.

IF YOU NEED ANSWERS

> Customers with questions about Friday’s transaction or who would like more information about the failure of Integrity Bank can visit the FDIC’s Web site at www.fdic.gov/bank/individual/failed/integrity.html, or call the FDIC toll-free at 1-800-523-0640, today from 9 a.m. to 6 p.m., on Sunday from 11 a.m. to 5 p.m., and thereafter from 8 a.m. to 8 p.m.

 U.S. BANK FAILURES IN 2008
Date failed..Bank..................Headquarters ......Assets
Aug. 29....Integrity Bank..........Alpharetta..........$1.1B
Aug. 22....Columbian ..............Topeka, Kan.........$752M
 ..........Bank and Trust
Aug. 1 ....First Priority Bank ....Bradenton, Fla. ....$259M
July 25....First National..........Reno, Nev...........$3.4B
 ..........Bank of Nevada
July 25....First Heritage Bank ....Newport Beach,......$254M
 ..........................................Calif.
July 11....IndyMac Bank............Pasadena, Calif...$32.01B
May 30 ....First Integrity Bank....Staples, Minn. ....$54.7M
May 9......ANB Financial ..........Bentonville, Ark. ..$2.1B
March 7....Hume Bank ..............Hume, Mo...........$18.7M
Jan. 25....Douglass National Bank..Kansas City, Mo. ..$58.5M

 TOP 10 BANK FAILURES IN GEORGIA
Ranked by assets.
Name ..................Headquarters ..Date ....Deposits........Assets
NetBank................Alpharetta ....9/28/07..$1.5 billion....$2.5 billion
Fulton FSA ............Atlanta ........1/4/91..$1.4 billion....$2 billion
Integrity Bank ........Alpharetta ....8/29/08..$974 million....$1.1 billion
Great Southern FS&LA ..Savannah ......6/22/89..$629.9 million..$880.2 million
First FS&LA............Atlanta ........3/9/89..$249.8 million..$301 million
First FS&LA............Columbus ......12/1/88..$241.6 million..$265.7 million
Southern FSA of Ga.....Atlanta........7/10/92..$151.4 million..$160 million
Federal SB, FSB........Swainsboro ....3/22/91..$131.2 million..$150.9 million
First Federal SA ......Warner Robins..4/12/90..$144.1 million..$150 million
Amtrade International..Atlanta........9/30/02..$95.8 million ..$122.3 million
Source: FDIC and staff research