MANHATTAN — Manhattan-based Landmark Bancorp, holding company of Landmark National Bank in Great Bend, fell victim to $10.3 million in hot checks, the company disclosed to federal regulators in August.
The transaction was disclosed in Landmark Bancorp Inc.’s Aug. 21 quarterly filing with the United States Securities And Exchange Commission for the quarter ending June 30, said Michael Schoepner, Landmark Bancorp’s president and chief executive officer. He could not comment on which of the bank’s branches was the source of the transaction.
Landmark has 29 locations in 23 communities across Kansas, including two in Great Bend.
“On Aug. 8, 2017, the Company was made aware that checks deposited by our customer from a third party were being returned by another financial institution due to uncollected funds related to the third party,” the statement to the SEC reads. This resulted in a $10.3 million overdraft balance. “An investigation of the situation and the potential recovery of losses are in their early stages, and accordingly, no conclusions have been reached concerning the responsibility for any potential losses, nor has there been a determination of whether or not existing insurance policies of any party will cover all or part of any possible losses.
“Since then, the entity whose checks to our customer were returned has provided $1.7 million in wire transfer deposits to our customer’s account, resulting in an $8.6 million overdraft as of the date of this filing,” the statement continues. “The Company intends to protect all of its rights pursuant to this matter and seek all available legal and equitable remedies.”
However, should there be no additional recoveries into the customer’s account, no insurance proceeds and the company were to absorb all the losses known at this time to be associated with this event (excluding the costs of investigation), it would incur an after-tax loss of approximately $5.4 million in the third quarter of 2017.
The overdraft means Landmark evidently honored the checks and allowed the funds to leave its customer’s account before the checks had a chance to clear. It’s likely the incident required the bank to file a suspicious activity report with federal regulators.
“We are still extremely well capitalized,” Schoepner said. “We are still expecting profitability in 2017.”
The Great Bend Tribune contacted the Office of the Comptroller of the Currency. An OCC spokesman said the agency could not comment.
The Federal Deposit Insurance Corporation was also called, but could not comment either.
Other Landmark locations include Manhattan, Auburn, Dodge City, Fort Scott, Garden City, Hoisington, Iola, Junction City, Kincaid, La Crosse, Lawrence, Lenexa, Louisburg, Mound City, Osage City, Osawatomie, Overland Park, Paola, Pittsburg, Topeka, Wamego and Wellsville.