Investar recording special provision tied to Hurricane Ida

Investar Holding in Baton Rouge, La., plans to recognize a $21.6 million loan-loss provision in the third quarter tied to hurricane damage to a borrower’s collateral.

The $2.7 billion-asset company said in a regulatory filing Thursday that the provision is tied to multiple loans with an outstanding aggregate loan balance of $40.4 million. 

The loans are secured by various types of collateral. Hurricane Ida, which hit in August, significantly reduced the value of some of the collateral. 

“At this time, the company is unable to quantify the amount of potential recoveries in excess of what is reflected in the current impairment charge estimate or if further impairment charges will be incurred related to this lending relationship,” the filing said. 

“The company currently expects an indeterminate amount of expenses in connection with the preservation and recovery of collateral," the filing added. 

Investar said it is unaware of additional material impairments tied to Hurricane Ida. 

Analysts said they expect the situation will lead Investar to report a third-quarter loss when it announces results on Oct. 21. 

Brett Rabatin, an analyst at Hovde Group, wrote in a client note that he expects a loss of about $10 million.

“While the credit would very likely not have been an issue without the impact of Hurricane Ida, and there is a lack of other systemic issues related to the hurricane, the net charge-off is big enough to warrant slightly less optimism on our thesis, despite the below-peer valuation and potential for profitability improvement in the next two years,” Rabatin wrote.