Old National Bancorp in Evansville, Ind., announced Monday that it expects to take a $21 million loan-loss provision for the first quarter that it is attributing largely to deteriorating credit quality on loans in the Indianapolis region made by a single lender who is now the subject of an inquiry by the Federal Bureau of Investigation.
The provision would be roughly 19 times Old National's fourth-quarter loss provision and is likely to take a large bite out of its first-quarter profit. In the previous quarter it earned $22 million.
The $7.8 billion-asset company said that $17 million of the provision is associated with the loan portfolio of a former employee it began investigating after it discovered that several loans he had originated were impaired. Though it found no loans to fictitious borrowers, the company said it did find that the employee had falsified documents and committed other violations of its lending policies. The FBI is investigating the loan officer's activities, and Old National said it plans to "pursue all legal remedies available."
"It is an isolated incident and is not reflective of the high standards of our corporate values," president and chief executive Bob Jones said in a press release.
Old National is scheduled to announce its first-quarter results April 28.
