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UPDATE 1-Chemical Financial to incur Q3 charge on loan fraud

Mon Sep 8, 2008 8:40am EDT

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(Recasts; adds details)

Sept 8 (Reuters) - Chemical Financial Corp (CHFC.O) said it will incur a charge of 30 cents a share in the third quarter, due to a fraudulent commercial loan transaction related to a single borrower.

"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," Chief Executive David Ramaker said in a statement.

The company expects an after-tax charge of $7.2 million for the total loan balance of $10.5 million tied to the borrower.

Two analysts, on average, expected the firm to earn 38 cents a share in the third quarter, before special items, according to Reuters Estimates.

The company did not identify the client and said no Chemical Financial personnel were found to be involved at this stage of the investigation.

The asset impairment was discovered on Sept. 3 and the company said it cannot estimate the amount it can recover at this time. (Reporting by Ratul Ray Chaudhuri in Bangalore; Editing by Jarshad Kakkrakandy)



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