Jeffersonville Bancorp took a chance with Freddie Mac, pushing the bank into the loss column for the third quarter of 2008. Its CEO sees a light at the end of the tunnel by year”™s end.
Jeffersonville Bancorp is parent company of First National Bank of Jeffersonville, with several locations in Sullivan County.
A $4.8 million impairment charge was reported in its quarterly financial statement filed with the Securities and Exchange Commission on Nov. 10.
In a published report, bank CEO Ray Walter said investments in Freddie Mac preferred stock had caused a net loss of $2.2 million to the bank.
The federal government has taken control of both Freddie Mac and Fannie Mae, but the ripple effects to banks that invested in Freddie and Fannie are being felt now around the state and country.
Jeff Bancorp”™s investment in Freddie was deemed nearly worthless, but the bank will be able to take advantage of a $1.9 million tax benefit in the fourth quarter of 2008, which should help ease the damage done by Freddie. The bank will also benefit from an insurance policy held on its former president, Andrew McKean, who died two months ago. Although McKean had left the bank”™s employ, the bank did not cease payments on McKean”™s insurance policy of $1.5 million, which will go back to the bank”™s depositors and shareholders.
Walter stated Jeffersonville Bank, despite its loss due to the Freddie Mac investment, should turn a profit for 2008 by the end of the fourth quarter.
