Chemical Financial Corp. of Midland, Mich., said Monday that it will take an after-tax charge of $7.2 million, or 30 cents per share, against its third quarter earnings in relation to what it said was a fraudulent commercial loan.
The company in a press release said the loan involved is secured, but the collateral may have limited value and because of that it had opted to charge off its entire $10.5 million exposure.
The loan was made to one long-term Chemical client. The fraud was discovered on Sept. 3 during an ongoing investigation, the company said.
"It appears that the client intentionally made inaccurate, misleading and potentially illegal representations about its financial condition and the source of repayment for a significant line of credit," said David B. Ramaker, president and chief executive of the $3.7 billion-asset company according to the press release.
He added: "We are extremely disappointed by this situation, but it is important to note that this is a single, isolated incident of fraud perpetuated by one borrower and we do not believe that it is reflective of the strength and character of our overall commercial loan portfolio." The company said that thus far it had found no evidence that Chemical employees were involved in the apparent deception.