Columbus-based Indiana Community Bancorp posted a second-quarter loss of nearly $2.9 million because borrowers are continuing to struggle to pay back loans.
Also, a previously announced fraud at one of the company’s largest customers is turning out to be more painful than previously expected.
The parent company of Indiana Bank & Trust Co. had recorded a profit of $845,000 a year ago, although bad loans and the fraud already had contributed to a $5.5 million loss in the first quarter of this year.
In January, Evansville-based Old National Bancorp announced its intent to buy ICB. Shareholders of ICB approved the acquisition last month.
According to a report ICB filed with the Securities and Exchange Commission, the company’s total non-interest income in the second quarter, at $2.8 million, rose 5 percent from the second quarter of 2011.
However, interest income, at $9.3 million, was down 15 percent, and net interest income was pulled into the red primarily because the provision for loan losses spiked from $2.7 million in the second quarter of 2011 to nearly $8.3 million in the second quarter of this year. The provision is an allowance set aside to cover bad loans.
The company said in the report that it determined in the second quarter that it was not going to be able to collect about $4.3 million from seven clients who owed about $33 million at the beginning of the year. ICB also said it had to write off $1.4 million related to a commercial real estate development loan.
The company also said that a previously announced fraud at one of its largest customers was deemed to be more costly because forensic accounting has determined that the value of available collateral for a loan was about $3 million less than previously expected.
Company officials could not be reached.
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