Somebody bounced $10.3 million worth of checks at a Kansas bank early this month and still hasn’t covered the hole.
Landmark National Bank disclosed the bad checks in its parent company’s regular quarterly filing with the Securities and Exchange Commission. The bank is based in Manhattan, Kan., and has branches in Overland Park and Lenexa.
The checks were written by a third party to a Landmark customer who deposited them, according to the filing. The bank presented the checks to the third party’s financial institution for payment.
Instead of honoring the checks, that institution returned them to Landmark “due to uncollected funds related to the third party,” the bank’s filing said.
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Landmark’s filing said the situation left the customer’s account with a $10.3 million overdraft that could end up costing the bank millions.
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.
The checks had bounced on Aug. 8.
Since then, the filing said, “the entity whose checks to our customer were returned has provided $1.7 million in wire transfer deposits to our customer’s account.”
Although the transfer covered some of the overdraft, Landmark National said it still faced an $8.6 million overdraft on its customer’s account as of the Aug. 21 filing.
Landmark officials declined to comment beyond the filing. The filing did not disclose the identities of the customer, the third party or the other financial institution involved.
Who ends up taking the loss remains unclear.
Landmark’s filing said efforts to recover the funds and investigate what happened were “in their early stages, and accordingly, no conclusions have been reached concerning the responsibility for any potential losses.”
The bank said it may be able to recover actual losses under its insurance policies though that was not clear at the time of the filing.
If no other funds show up, either from the customer, third party or insurance, Landmark said it stood to lose $5.4 million after taxes.
The bank is owned by Landmark Bancorp., which has $910.8 million in assets and earned $4.59 million in the first half of the year. Although the $5.4 million loss would offset those first-half profits it would not be expected to leave the bank with a loss for the full year.