Despite a second-quarter loss of $43.9 million that left it with a capital shortfall, Integra Bank Corp. in Evansville, Ind., said Friday that it has made progress in dealing with its souring credit quality.

The company's Integra Bank unit had a total risk-based capital ratio of 9.74% at June 30, making it adequately capitalized.

That ratio must be at least 10% for a bank to be considered well capitalized.

In a press release, Mike Alley, the $3.4 billion-asset company's interim chairman and chief executive officer, said he was "disappointed" with the results, but cited improvements on several fronts.

"During the second quarter, we successfully executed a profit improvement initiative, initiated efforts to increase our margin and net interest income, took proactive steps to reduce our construction and development concentration, made progress on our CEO search, and most importantly, made further changes that we believe will stabilize and then reduce our nonperforming assets and credit losses," Alley said.

Because of continued weakness in its residential construction portfolio, nonperforming assets rose 275% from a year earlier, to $211.6 million, or 8.9% of total assets. But the nonperformers were virtually flat compared with the first quarter.

Net chargeoffs increased 833% from a year earlier and 66% from the first quarter, to $28.8 million. The chargeoffs included the remainder of a $17 million loan to the troubled Peoples Community Bancorp Inc. in West Chester, Ohio. Integra had charged off part of the loan in the first quarter.

The provision for loan losses was $32.5 million, up 441% from a year earlier, but up only slightly from the first quarter.

The quarterly loss also included an increase of $11.4 million in the valuation allowance on its deferred tax assets and a $13.5 million other-than-temporary impairment charge on its investment securities.

The company had lost $900,000 in the second quarter of last year.

Its bank is operating under a regulatory order. In May, the bank entered into a formal written agreement with the Office of the Comptroller of the Currency to reduce criticized assets and improve earnings, among other things. However, that agreement did not impose elevated capital requirements.

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