MidwestOne in Iowa to record large 4Q loan-loss provision
MidwestOne Financial Group in Iowa City warned that it will record a large loan-loss provision in the fourth quarter.
The $3.1 billion-asset company said in a press release Monday that the quarter will likely include a provision of $10.3 million to $10.8 million that will largely reflect the deterioration of a single commercial lending relationship.
The loan was classified as substandard before the fourth quarter, and the company had already set aside $1.9 million to cover potential losses.
The borrower, a manufacturing-based company in Iowa City, has cash flow issues, prompting the bigger provision, Damon DelMonte, an analyst at Keefe, Bruyette & Woods, wrote in a note to clients after speaking with MidwestOne’s management. The loan, which remains current, accounts for about 70% of the expected quarterly provision, he added.
MidwestOne believes it now has adequate reserves to cover the relationship, DelMonte said.