An Iowa thrift company said fraud by a former loan officer cost it more than $500,000, putting it in the red in the latest quarter.
First Midwest Financial Inc., Storm Lake, said in a press release Friday that it has alerted law enforcement officials and is exploring "avenues of recourse" against the former officer.
"While the investigation has not been completed, the matter appears to be an isolated incident," said James S. Haahr, chairman, president, and chief executive officer. The $405 million-asset company remains financially strong, he said.
First Midwest did not name the former employee or give details of the alleged fraud. Telephone calls seeking further information were not returned.
Shares of the company fell $1.75 on Friday, to $23. They have since come part way back and were trading at $23.75 at midday Tuesday.
In the press release, First Midwest said it boosted loan-loss reserves by $513,000, to $1.5 million, and as a result lost 19 cents a share in the quarter ended March 31, the second of its fiscal year. It earned $850,000, or 29 cents a share, in the year-earlier quarter.
Net income for the six months ended March 31 fell to $476,000, from $1.8 million. Return on assets dropped from 0.99% to 0.24%, and return on equity from 8.26% to 2.18%.
First Midwest is the parent company of three thrifts: First Federal Savings Bank of the Midwest in Storm Lake, Brookings Federal Savings Bank in Brookings, S.D.; and Iowa Savings Bank in Des Moines. The company also owns Security State Bank, a commercial bank in Storm Lake acquired in October 1996.
