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May 3, 2023

Dear Fellow Shareholders,

Today is the second anniversary of the opening of Integrity Bank for Business on May 3, 2021. Much has happened since we opened for business. Who we are and our place in the local community banking market is becoming much clearer to our business community.

Right now, the public and regulatory focus on banks of all sizes is on liquidity. For too long, banks paid little or no attention to the liquidity risks on their balance sheets. Their quarterly press releases often contained insufficient information for even the most astute clients and investors to have true pictures of the actual liquidity available to fund deposit outflows. Loan to true core deposits (which exclude brokered, collateralized “preferred”, and reciprocal deposits) ratios have approached or even exceeded 100%. For over a year, most banks have been holding securities portfolios with substantial embedded losses. Selling these securities for liquidity purposes and recognizing the embedded losses then becomes very problematic for capital levels. Additionally, many of these securities are pledged to third parties as collateral for borrowings and government deposits and are therefore unavailable to fund deposit outflows. As a result, many banks have relied on brokered deposits and so-called reciprocal deposits as substitutes for core deposits.

Brokered deposits are high-cost “deposits” purchased through brokerage firms on a nationwide basis. Community banks in need of funds bid for these “deposits.” Brokerage firms fill community banks’ bids for brokered deposits starting with the highest rate bids until the brokerage firms have filled their clients’ orders for deposits. In addition, the community banks pay fees to the brokerage firms for these “deposits.” Quite simply, brokered deposits are high-cost borrowed money through brokerage firms and not true deposits from community bank clients.

Once a community bank starts funding its loans with brokered deposits, it is extremely difficult to repay these brokered deposits in the ordinary course of business. Banking regulators pay close attention to a bank’s use of brokered deposits as a material source of funding, particularly if the bank has a low capital level. Integrity has no plans to ever use brokered deposits.

From the beginning, we have focused our efforts on building for the benefit of our clients and shareholders a bank with a “fortress balance sheet” to weather the uncertainties that arise in banking from time to time. What do I mean by a “fortress balance sheet?” A “fortress balance sheet” has most if not all of these characteristics: (1) liquidity from true core deposits, (2) high-quality and readily marketable securities, (3) a tangible capital ratio of tangible capital to total assets well above bank averages, (4) a loan to true core deposits ratio well below bank averages, (5) reliable secondary sources of liquidity from governmental agencies and other banks, and (6) excellent asset quality.

Integrity meets all of these criteria for a “fortress balance sheet.” Unless otherwise noted, the information set forth below is as of March 31, 2023.

1. Cash and unpledged securities of $49.4 million and as a percentage of uninsured deposits of 92.3%;
2. All securities issued by or guaranteed by U.S. government-sponsored entities;
3. Tangible capital ratio after deductions for net unrealized losses on all securities of approximately 20%;
4. Loans to true core deposits (which exclude brokered, collateralized “preferred”, and reciprocal deposits) ratio of 62.2%;
5. Available secondary sources of liquidity for Integrity are lines of credit from the traditional Federal Reserve Discount Window and the new Federal Reserve Bank Term Funding Program, advances from the Federal Home Loan Bank of Atlanta, and lines of credit with Bankers’ Banks (as of today, Integrity does not have an outstanding balance under any of these sources of liquidity but does regularly take advances from the Federal Home Loan Bank of Atlanta in the ordinary course of business); and
6. No past due loans, no nonaccrual loans, and no foreclosed assets.

We invite you to compare these statistics with those of our local community bank competitors. All of this information is contained in the public “Call Reports” that all banks must file with our federal regulatory agencies. “Call Reports” are readily accessible for all banks on the FDIC website.

To add even more cash to our balance sheet and to increase our monthly interest income, in April we sold approximately $24 million of securities yielding approximately 3% and placed the proceeds in our cash Federal Reserve account currently yielding 4.9%. We incurred a loss of approximately $872 thousand on these transactions, most of which had been already included in our tangible capital as of March 31st. In this banking environment, a Bank simply cannot have too much cash on deposit with the Federal Reserve.

With all of this in mind, we have christened Integrity as “Too Strong to Fail.” Admittedly, Integrity is not “Too Big to Fail” just as none of our local community bank competitors is “Too Big to Fail.” But our “fortress balance sheet” should give you confidence in your investments in Integrity. Safety and soundness always come first at Integrity.


Michael S. Ives
President and Chief Executive Officer
Integrity Bank for Business


The above letter from the CEO of Integrity Bank for Business (the “Bank”) may contain “forward looking statements” regarding future events and future results of the Bank. Forward-looking statements can be identified by words such as “anticipates,” “estimates,” “intends,” “plans,” “believes,” “projects,” “will,” “expects,” “may,” and similar references to future periods. Forward-looking statements are neither historical facts nor assurances of future performance, but are based only on the Bank’s current beliefs, expectations, and assumptions regarding the future of its business, plans and strategies, projections, anticipated events and trends, the economy, and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict and outside of the Bank’s control. The Bank’s actual results and financial condition may differ materially from those indicated in forward-looking statements, and therefore you should not rely on forward-looking statements. Any forward-looking statement made by the Bank is based only on information available to the Bank as of the date on which it is made, and the Bank has no obligation to update any forward-looking statement, whether as a result of new information, future developments or otherwise.

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