Tower Financial Corp. in Fort Wayne, Ind., has announced it will take a charge in the third quarter to cover several problem residential construction loans.
The $701 million-asset Tower said late Friday that, though most of the loans are still performing, it would take an additional $3.6 million charge to better reflect the current value of the loans' underlying collateral. As a result, Tower expects the charge to negatively affect third-quarter earnings by $2.5 million, after taxes.
The company said it expects to report a third-quarter loss of $1.8 million to $2.2 million, when it reports its results on Oct. 26. In the third quarter of 2006, net income rose 4.3%, to $973,000.
In the second quarter, Tower's net income fell 76%, to $217,000, due to deteriorating credit quality. Net chargeoffs rose more than fivefold in that quarter, to $1.9 million, or 1.36% of average loans.
Despite the news, Tower's shares were up slightly in late trading Monday, to $14.04.
