The restructuring of a real estate loan to reflect a decrease in its appraisal value caused Indiana Business Bancorp to report a loss of $484,678 in the second quarter.
The Indianapolis-based parent of Indiana Business Bank said on Friday that the loss was primarily due to a provision expense of $706,250 charged during the quarter. As a result of the reappraisal, the book value of the restructured loan was written down to reflect the current value of the real estate, the bank said.
The loss translated to 32 cents per share, compared to a profit of $37,907, or 3 cents per share, during the second quarter of 2009.
Net-interest income from loans in the second quarter declined by 9.7 percent compared with the same time last year. The $70,823 reduction, to $732,242, reflects a smaller loan portfolio. The value of total loans outstanding as of June 30 was almost $4 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.
“We continue to manage our non-performing assets in order to return them to performing status, by working with borrowers in restructuring or renegotiating debt, or some other satisfactory resolution,” Indiana Business Bank President and CEO James S. Young said in a prepared statement.
Young said most of the problem loans were made between 2005 and 2007.
The bank’s allowance for loan losses represented 2.2 percent of total loans, which compares favorably to competitors, the bank said. Its $1.5 million allowance for loans losses, however, grew 20 percent, from $1.2 million in the second quarter of 2009.
Deposits increased by more than 4 percent, to $73 million, compared with the same time last year.