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Integra Bank's auditor says situation may be dire

February 1, 2011

Evansville-based Integra Bank reported a fourth-quarter loss of $35 million, and its auditors say the institution may need an infusion of capital to survive.

Monday’s announcement is the latest ominous news for Integra, which is at risk of becoming the second Hoosier financial institution to fail since the financial crisis began in 2008. Regulators seized the first, Columbus’ Irwin Union Bank and Trust, in September 2009.

Integra and its parent, Evansville-based Integra Bank Corp., have been paying a steep price for aggressively expanding early in the 2000s into commercial real estate loans—a market segment that was decimated when the economy tanked.

"Our core community banking business continued to perform well; however, the persistent weakness in commercial real estate markets continues to put intense pressure on our recovery and has resulted in our current quarterly loss," Mike Alley, chairman and CEO, said in a statement.

The statement noted that Integra’s “auditors have advised management that unless the company is able to obtain firm commitments for a substantial capital infusion” quickly, the auditors’ report “will indicate that there is substantial doubt concerning the company's ability to continue as a going concern.”

Integra Bank Corp.’s board hired Alley, a veteran Indianapolis banker, in May 2009 to try to turn around the ailing institution. He told IBJ in December that a plunge in the value of real estate that Integra holds as collateral on loans has made his task tougher than expected.

Monday’s announcement contained additional bad news:

- Integra Bank’s capital ratios remain below levels required by the Office of the Comptroller of the Currency. In addition, the OCC has rejected a plan Integra submitted to improve those levels.

- Because the bank is inadequately capitalized, it expects to become ineligible to receive additional deposits from units of government in Indiana. Worse, Integra expects the $117 million in public funds it now holds to gradually be transferred to other institutions.

Integra Bank Corp. shares closed Monday at 75 cents each, down 3 cents on the day.

 

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