By Madlen Read
Associated Press
Saturday, August 30, 2008

NEW YORK, Aug. 29 -- Integrity Bank of Alpharetta, Ga., on Friday became the 10th U.S. bank to fail this year, done in by the very business it was built on -- real estate lending.

Regions Bank of Birmingham, Ala., will assume all of Integrity Bank's $974 million in insured and uninsured deposits in 23,000 accounts, and about $34.4 million of its $1.1 billion in assets.

The remainder of Integrity's assets will be retained by the Federal Deposit Insurance Corp. The FDIC said it estimates that Integrity's failure will cost its deposit insurance fund $250 million to $350 million.

Integrity Bank, which opened in November 2000, specialized in real estate lending in the Atlanta area with a self-described "faith-based culture." Throughout the early part of the decade, when the housing market was booming, Integrity grew into a billion-dollar, publicly traded company. But when the real estate market started faltering, the bank found itself in trouble.

The bank replaced its chief executive in August 2007 and hired a turnaround expert in September, only to voluntarily delist its shares from the Nasdaq Global Market in March. Nasdaq had threatened to delist the company for failing to comply with reporting standards.

Rickey McCullough, an FDIC spokesman, said late Friday that the bank failed due to its aggressive pursuit of construction loans, coupled with falling real estate values and "inadequate risk management."

Construction loans made up 76 percent of the bank's total loan portfolio. For the quarter ended June 30, the bank posted a loss of $33.56 million.

After being closed on Friday by the Georgia Department of Banking and Finance, Integrity's five branches in Atlanta will open Tuesday as Regions Bank branches.

Integrity is the first Georgia bank to fail since the late September 2007 closing of NetBank, also based in Alpharetta, the FDIC said.

The number of bank failures has shot up this year during continuing mortgage defaults. On July 11, California mortgage lender IndyMac Bancorp, with $32 billion in assets, became the largest thrift to fail in U.S. history.

According to FDIC data released Tuesday, the number of troubled U.S. banks jumped to 117 -- the highest level in about five years -- during the second quarter, up from 90 in the prior quarter. Bank profits plunged 86 percent during that quarter, the FDIC said.