InsCorp, Inc. Reports Apparent Loan Fraud in Advance of Quarter End

Rhea-AI Summary

InsCorp (OTCQX: IBTN) disclosed an apparent $5.0 million loan fraud affecting a single credit relationship, and expects a fourth-quarter 2025 loss after charging off the full balance while pursuing recovery.

The company said the event is isolated, the bank remains well-capitalized with $962.3 million total assets as of Sept. 30, 2025, $118.1 million total risk-based capital (13.30%), and an allowance for credit losses equal to 1.34% of total loans of $808.6 million. Management expects the company to remain profitable for the full year ended Dec. 31, 2025, and plans a third-party audit of lending practices while pursuing legal remedies.

Positive

• Total assets of $962.3 million as of Sept. 30, 2025
• Total risk-based capital of $118.1 million (13.30%)
• Allowance for credit losses 1.34% of total loans ($808.6M)
• Company expects to remain profitable for full year 2025

Negative

• Charge-off of $5.0 million from a single credit relationship
• Management expects a loss in Q4 2025 due to the charge-off
• Potential modest reduction in tangible book value growth for the quarter

Bank remains well-positioned to absorb impact while supporting continued growth

NASHVILLE, Tenn., Dec. 11, 2025 /PRNewswire/ -- Today, InsCorp, Inc. (OTCQX: IBTN) has reported an incident of loan fraud perpetrated against INSBANK, which it anticipates will adversely affect the company's earnings in the fourth quarter of 2025. Results of consolidated operations will be routinely shared by press release in late January 2026. Given the amount of the fraud-related charge-off, management expects the company to report a loss for the quarter but will remain solidly profitable for the year ended December 31, 2025. This fraud event is limited to a single credit relationship with a total exposure of $5 million. The Bank is pursuing recovery of loan proceeds through remedies within its loan documents, by working with law enforcement, and pursuing all options through civil and criminal courts. As it is too early to ascertain recovery potential, management believes the appropriate course of action is to charge-off the entire balance while it pursues the perpetrator.

Importantly, the fraudulent credit appears to be an isolated incident and is not part of a regular lending program in which similar exposures might exist. The perpetrator had gained the bank team's confidence over years, having served on the leadership team of a vendor that provides a non-critical function to INSBANK. After developing this relationship over two years, the Bank extended credit to a separate company controlled by the perpetrator. 

"In our 25 years of making loans, we have periodically fended off or caught several purveyors of loan fraud, but this particular bad actor gained our team's confidence over a couple of years and then set about an elaborate scheme where the perpetrator managed to create an opportunity to exploit the bank," said Jim Rieniets, CEO of INSBANK. "We are equally enraged and disappointed; yet, at the same time, we are emboldened to ensure both that an exploitive opportunity such as this is not possible again, and that our team remains focused on our strategic objectives of growing value and curating a unique and valuable customer experience." 

The bank is well-positioned to absorb the impact of this incident, with healthy capital ratios, loan loss reserve balances that exceed most of its peers, and quality loan portfolio performance overall. As of September 30, 2025, the bank had total assets of $962.3 million, maintained total risk-based capital of $118.1 million, which represented 13.30% of risk-weighted assets, and an allowance for credit losses of 1.34% of total loans of $808.6 million.  Prior to this credit incident, loan losses exceeded 0.20% of average loans only twice annually in the past 25 years and were 0.00% of average loans over the year ended September 30, 2025. 

"While this incident is indeed unfortunate, the impact on our shareholders should be limited to an interruption of one quarter's earnings, and a modest impact on tangible book value growth. Fortunately, the company has momentum around loan and deposit growth which we expect to allow us to return to our operating earnings trajectory in the first quarter of 2026," Rieniets continued.

While management and the board do not expect other similar fraud risks to be latent in the portfolio, to ensure this and to potentially refine any processes that may enhance future mitigation, the company is engaging a third-party auditor to review specific lending administration and related diligence practices. This is being done even though no recent external, internal, or regulatory audit has identified any material weakness in lending administration.

About InsCorp, Inc. and INSBANK

Since 2000, INSBANK has offered clients highly personalized services from experienced relationship managers, positioning itself as an innovator by leveraging technology to deliver those services efficiently and conveniently. In addition to its commercial-focused operation, INSBANK operates two divisions: Medquity and Finworth. Medquity offers healthcare banking solutions to physicians, partnerships, and practices nationwide. Finworth offers nationally available virtual private client services for interest-bearing deposits. InsCorp, Inc., a Tennessee bank holding company, owns INSBANK. InsCorp, Inc.'s shares are traded on the OTCQX under the ticker symbol IBTN. Headquartered in Nashville at 2106 Crestmoor Road, the bank has offices in Brentwood at 5614 Franklin Pike Circle, and will soon open a location in Murfreesboro at 1574 Medical Center Parkway. For more information, please visit www.insbank.com.

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SOURCE INSBANK

FAQ

What did InsCorp (IBTN) announce about loan fraud on December 11, 2025?

InsCorp reported an apparent $5.0 million loan fraud affecting a single credit relationship and said it charged off the full balance while pursuing recovery.

How will the IBTN loan fraud affect InsCorp's Q4 2025 earnings?

Management expects the fraud-related charge-off will cause InsCorp to report a loss for Q4 2025.

Is InsCorp (IBTN) still profitable for the year after the $5M charge-off?

Yes; the company expects to remain solidly profitable for the year ended Dec. 31, 2025 despite the Q4 loss.

How strong is InsCorp's capital position after the fraud announcement (IBTN)?

As of Sept. 30, 2025, InsCorp reported $962.3M in assets, $118.1M in risk-based capital (13.30%), and an allowance for credit losses of 1.34% of loans.

What recovery and remediation steps is InsCorp taking after the fraud (IBTN)?

The bank is pursuing loan remedies, working with law enforcement, pursuing civil and criminal options, and engaging a third-party auditor to review lending practices.

Will the fraud at InsCorp affect future loan underwriting (IBTN)?

Management said the fraud appears isolated and the company is reviewing lending administration to refine controls and mitigation.