NEWTOWNHAMILTON, Northern Ireland (CNN) -- A car bomb exploded in Northern Ireland on the eve of an election to a new assembly on Wednesday, causing widespread damage in the town of Newtownhamilton.

Security sources said preliminary reports indicated two people could have been hurt but gave no further details.

Newtownhamilton is a small town in County Armagh near the border with the Irish republic. A police spokeswoman said the car bomb went off at 1:34 p.m. (1234 GMT/8:34 a.m. EDT).

"I understand there has been extensive damage to housing and banks," she said.

The blast occurred after news media received a coded warning from the outlawed Irish Nationalist Liberation Army (INLA), which opposes a cease-fire being observed by the Irish Republican Army.

The INLA is against the British-ruled province's peace process, which produced a multi-party agreement that laid the foundations for Thursday's assembly election.

Reuters contributed to this report.