Hills Bancorp. in Hills, Iowa, expects to record a nearly $2 million impairment charge in the fourth quarter.
The $2.3 billion-asset company disclosed in a regulatory filing Tuesday that the anticipated charge is tied to seven commercial and financial loans to one of its borrowers.
Hills said it became aware of a possible collateral issue in late October. It has since determined that the value of the collateral "is insufficient to mitigate a potential loss" and that it "appears uncertain" that the borrower will pledge any more collateral.
Hills first disclosed an potential issue in its Nov. 6 quarterly filing with the Securities and Exchange Commission. At that time, the company said it did not anticipate a loss tied to the total outstanding loan balance, adding that it was working with the borrower to verify and gather collateral.