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New York - Integrity Bank of Alpharetta on Friday became the 10th US bank to fail so far this year, done in by the very business it was built on - real estate lending.
Regions Bank of Birmingham, Alabama, is assuming all of the Alpharetta, Georgia, banks' $974m in insured and uninsured deposits in 23 000 accounts, and about $34.4m of the bank's $1.1bn in assets.
The remainder of Integrity Bank's total assets are being retained by the FDIC. The FDIC said it estimates that Integrity's failure will cost its deposit insurance fund $250m to $350m.
Integrity Bank, which opened for business in November of 2000, specialised in real-estate lending in the Atlanta area with a self-described "faith-based culture." Through the early part of the decade, when the housing market was booming, Integrity Bank grew into a billion-dollar, publicly traded company. But when the real estate market started faltering, the bank found itself in trouble.
The bank fired its chief executive in August 2007, nabbed a turnaround expert in September, only to voluntarily delist from the Nasdaq market in March of this year.
FDIC spokesperson Rickey McCullough said late Friday the bank failed due to its aggressive pursuit of construction loans, coupled with falling real estate values and "inadequate risk management."
Construction loans comprised 76% of the bank's total loan portfolio. During the quarter ending June 30, the bank posted a net loss of $33.56m.
After being closed down on Friday by the Georgia Department of Banking and Finance, Integrity's five branches in Atlanta will open Tuesday after Labour Day as Regions Bank branches.
Regions is the 18th largest US bank, according to American Banker, with about $144bn in total assets.
The number of bank failures has shot up this year amid continuing mortgage defaults. On July 11, California mortgage lender IndyMac Bancorp Inc, with $32bn in assets, became the largest thrift to fail in US history.
According to FDIC data released Tuesday, the number of troubled US 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 by 86 percent during that quarter, the FDIC said.