Middleburg Financial in Middleburg, Va., plans to record a $3 million impairment charge tied to a participation loan in which the borrower has been accused of fraud.
The $1.3 billion-asset Middleburg will record the charge in the fourth quarter, according to a regulatory filing. Including the impact of the charge and a higher provision for loan losses, Middleburg said it still expects to report a profit for the fourth quarter
The charge is tied to a participation loan in which another Virginia community bank is the lead lender, Middleburg said. Middleburg did not identify the other bank.
In the participation loan, the borrower filed false accounts receivable, which caused the lead lender to issue largely unsecured advances. Additionally, the borrower made large unauthorized cash distributions to one of its principals. Middleburg did not identify the borrower.