Integrity Bancshares Inc. of Alpharetta, Ga., announced Friday that its second-quarter net income would be reduced by about $21 million because of significant deterioration in its commercial real estate loan portfolio.
The $1.2 billion-asset company said it would take a loan-loss provision of $31 million and reverse about $3 million of interest income related to the loans, all of which are associated with or controlled by one guarantor.
The provision is likely to wipe out profits for the second quarter and the year. Integrity earned $2.9 million in the first quarter and $10.1 million last year.
Integrity first disclosed in April that the loans could be a problem, saying at the time that the loans were well collateralized and that it was working with the borrowers to make them current. Since then it has had internal staff and external advisers review the loans to determine the extent of the impairment.
There were originally 14 loans totaling about $83 million. Since then the company has restructured the loans to minimize its losses. It has increased its first mortgage on the most valuable piece of real estate collateral to pay off three of the loans that were secured by intangible collateral and one that was secured by a subordinated mortgage. The collateral property is being converted from a hotel into luxury condominiums.
Integrity now has $61.1 million of loans secured by first mortgages, roughly $13 million secured by junior mortgages, and about $9 million secured by intangible collateral. The condominium property secures about $48.5 million of the loans. The remaining $12.6 million of the first mortgage debt is made up of five loans on five separate shopping centers.
The loan officer who started the relationship with the guarantor no longer works at Integrity, the company said.
Integrity's shares were down about 1.7% late Friday, to $6.56 a share. They are down more about 38% since the initial disclosure of the loan troubles and 54% since mid-January.
