Bad checks could push a Kansas bank into the red
Landmark Bancorp in Manhattan, Kan., could lose more than $5 million if a recently discovered overdraft situation cannot be resolved.
The holding company for the $911 million-asset Landmark National Bank discovered the shortfall earlier this month and disclosed it Monday, in a 10-Q report filed with the Securities and Exchange Commission.
According to Landmark, third-party checks deposited by one of its customers were returned by the other financial institution due to insufficient funds. The returned checks initially produced a $10.3 million overdraft, but the third party has since wired $1.7 million into the customer’s account, cutting the shortfall to $8.6 million.
In its 10-Q, Landmark promised to aggressively pursue every available legal avenue, but added it might have to record a third-quarter charge of $5.4 million if no additional recoveries are forthcoming.
A loss of that magnitude would be a huge blow to Landmark, which reported net income of $4.6 million for the first six months of 2017. However, the bank is well capitalized, with a 10.08% leverage ratio at June 30.
Attempts to contact Landmark officials by phone and email were unsuccessful. Barry Wilkerson, the county attorney for Riley County, which encompasses Manhattan, said in an email that his office has been consulted about the situation.
Check kiting is a perennial headache for banks, which frequently incur significant losses and legal fees as a result.
In August 2016, the $31 billion-asset Synovus Financial Corp. agreed to a $9 million payout to settle charges it failed to stop a kiting scheme perpetrated by one of its commercial clients.
A related incident forced the $147.8 million-asset Liberty Bell Bank in Marlton, N.J. to take a $2.1 million charge in the second quarter of 2013.