Higher non-interest income and a lower loan-loss provision expense helped Indiana Business Bancorp turn a profit in the third quarter.

The Indianapolis-based parent of Indiana Business Bank said on Friday that it earned $135,136, or 9 cents per share, compared with a loss of $347,888, or 23 cents per share, during the third quarter of 2010.

Net-interest income from loans in the quarter declined by 12 percent compared with the same time last year. The $61,788 reduction to $709,594 reflects a smaller loan portfolio. The value of total loans outstanding as of Sept. 30 was roughly $15 million lower than in the year-ago period.

The bank said the contraction of the portfolio follows management’s decision to exit relationships with customers with higher credit-risk profiles and to sell parts of new Small Business Administration loans in the secondary market.

“Our substantial improvement in our net interest margin, the gains recorded from SBA loan sales and our reduction in non-performing assets have all contributed to a solid year-to-date performance,” Indiana Business Bank President and CEO James S. Young said in a prepared statement.

The bank’s allowance for loan losses represented 2.7 percent of total loans. The allowance remained steady from the year-ago period, at $1.4 million.

Deposits shrank by 24 percent, to $55.2 million, compared with the same time last year.