Loans to a Miami area real estate developer appear to have contributed to regulators seizing the 10th U.S. bank of the year, according to the Miami Herald.
Integrity Bank, a $1.1 billion in assets institution based in the suburban Atlanta city of Alpharetta, was shut Friday afternoon, Aug. 29, by the Georgia Department of Banking and Finance. The Federal Deposit Insurance Corp was promptly named the receiver of the failed institution.
The failure is estimated to cost between $250 million and $350 million, according to the FDIC, which insures depositors up to $100,000 per account.
Guy Mitchell, a Coral Gables real estate investor who bought the oceanfront Royal Palm Hotel in the South Beach neighborhood of Miami Beach for $128 million in 2004, was a client of Integrity Bank, according to the Miami Herald article.
Mitchell made headlines in 2004 when he and condo-hotel converter Robert Falor tried with some success to convert the convention center hotel into a condominium-hotel at the peak of the market, but “has since fallen behind on loan payments amid a failed condo conversion,” according to the Miami Herald article.
“The owner of the troubled Royal Palm hotel in South Beach may be a central player in a Georgia bank's failure,” according to the Miami Herald article.
The Miami Herald adds, “In regulatory filings, Integrity acknowledged making 14 loans worth $83 million to companies owned by the same guarantor -- an amount roughly equal to the cash the bank reported having on hand last year.”
Integrity Bank is the sixth institution to be shut since July 11, and the second bank in a week to fail. On August 22, regulators seized Columbian Bank and Trust Co., a $752 million in assets institution based in Topeka, Kansas.
Regulators, who show no sign of slowing down in their mandate to shore up the financial industry in the midst of the U.S. real estate meltdown, seized Integrity Bank with precision and planning.
When the six former Integrity Bank locations reopen on Tuesday after the Labor Day holiday, customers will learn that their deposits - about $974 million - have been assumed by Regions Bank, a $139.4 billion institution based in Birmingham, Ala.
Regions Bank has 1,936 branches in 16 states, including 153 locations in Georgia.
“All depositors of Integrity Bank, including those with deposits in excess of the FDIC's insurance limits, will automatically become depositors of Regions Bank for the full amount of their deposits, and they will continue to have uninterrupted access to their deposits,” according to an FDIC statement. “Depositors will continue to be insured with Regions Bank so there is no need for customers to change their banking relationship to retain their deposit insurance.”
As part of the deal with regulators, Regions Bank has agreed to purchase more than $34 million worth of assets from the failed Integrity Bank. The remaining assets will be retained by the FDIC until they can be liquidated.
This is the first Georgia bank to fail since NetBank, also based in Alpharetta, was shut by regulators in September 2007.
For the year, California and Missouri lead the nation in failed institutions with two banks each. Florida, Nevada, Arkansas, Minnesota, Kansas, and of course Georgia, have each had one institution shuttered this year.
A host of other banks are being closely monitored by industry watchers who anticipate further failures this year, especially in Sun Belt states where the housing crisis has hit hardest.
Before the seizure of Kansas-based Columbian Bank, regulators were busy in Florida.
First Priority Bank of Bradenton, a six branch institution with $261 million in assets located on the state’s west coast, was shutdown on, Aug. 1, marking the first Florida institution to be closed by regulators in more than four years.
To see a Florida bank fail wasn’t a shock to many. Investors are closely watching the banking industry in Florida given the state’s rapidly deteriorating real estate market, which was a key lending focus for most institutions.
Deteriorating real estate markets on the West Coast of the United States prompted federal regulators to seize three banks in three states in the month of July.
Federal regulators shut down on July 25 two banks in three states with combined assets of $4.6 billion and 28 locations scattered around Arizona, California, and Nevada.
Regulators seized the First National Bank Holding Co. in Scottsdale, Ariz, the parent company of First Heritage Bank in Newport Beach, Calif., and the First National Bank of Nevada in Reno, Nev. The First National Bank of Arizona merged with the First National Bank of Nevada on June 30, only to be shutdown 25 days later.
The estimated cost of the failure of First National Bank of Nevada and First Heritage Bank is projected to be $862 million, according to the FDIC.
On July 11, federal regulators shut down IndyMac Bank, a $32 billion institution based in Pasadena, Calif. The estimate cost of that seizure is between $4 billion and $8 billion, according to the FDIC.
Before IndyMac, regulators seized Minnesota-based First Integrity Bank with $54.7 million in total assets and $50.3 million in total deposits on May 30; Arkansas-based ANB Financial with $2.1 billion in total assets and $1.8 billion in total deposits on May 9; Missouri-based Hume Bank with total assets of $18.7 million and total deposits of $13.6 million on March 7; and Missouri-based Douglas National Bank with $58.5 million in total assets and $53.8 million in total deposits on January 25, according to the FDIC.
Peter Zalewski is a principal with the consulting company Condo Vultures® LLC and a licensed real estate broker with Condo Vultures® Realty LLC. Peter can be reached at 305-865-5629 or by email at peter@condovultures.com. Be sure to check out Peter’s blog at CondoDump.com. Don't forget to sign up for our weekly Market Intelligence Report. Looking for a property at a deep discount? You are encouraged to take a peek at the Vultures Database™ .
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