Blue Hills Bancorp in Norwood, Mass., expects to record a third-quarter chargeoff tied to a commercial borrower that may have committed fraud.
The $2.2 billion-asset company disclosed in a regulatory filing Tuesday that the expected $3.3 million chargeoff is associated with loans with a $4.1 million balance to a commercial customer that were placed on nonaccrual status during the second quarter. At the time, the company set up a $558,000 reserve against the loans.
Blue Hills said that it initiated foreclosure and liquidation proceedings on collateral pledged to back the loans. One loan is for owner-occupied commercial real estate; three others were issued to finance other business assets.
The company also said that it is conducting an investigation, including the use of forensic accountants, of representations made by the unnamed customer as part of the origination process.
Blue Hills "believes the customer made fraudulent misrepresentations about its financial condition and the collateral," the filing said. Blue Hills, meanwhile, said it plans to "pursue all legal remedies against the customer for losses and costs related to the loans," though there is no assurance of a "significant" recovery.
The bank said it will provide an update when it reports third-quarter results next month.