Indiana-based S&T Bancorp and its subsidiary, S&T Bank, have filed formal notice with the U.S. Securities and Exchange Commission in which the bank says it may have been victimized by a business customer, with losses that could total tens of millions of dollars.
S&T says the customer, which it does not name in the filing, used a “check kiting” scheme which resulted in returned deposits totaling about $59 million. Check kiting relies on a bank taking several days to determine that a check was written on insufficient funds, while the customer has access to the funds the next business day. It can involve one bank or multiple banks.
The bank also may incur $15.1 million line of credit loss stemming from a loan agreement and line of credit established with the customer. $14.3 million of that is a mortgage loan commercial real estate and $750,000 is a line of credit, which is secured by a lien on the company’s assets.
In its filing, S&T does not detail how the scheme was carried off, but says its investigation leads it to believe it involves just one customer. The actual losses will depend on a number of factors, including the ability to recover lost funds. S&T will pursue all available sources of recovery and whatever other means it can to mitigate the losses.
George Basara, Executive Vice President, General Counsel, and Director of Employee Services at S&T Bank, issued the following statement shortly after 2 p.m. this afternoon: “S&T Bank remains a solid, well-capitalized community bank with great employees and very loyal customers. We will continue to provide the highest quality of service to our customers and will remain a good partner with the communities that we serve.”
S&T’s Board of Directors has retained outside counsel to conduct an internal review and has notified the appropriate law enforcement and regulatory authorities. The bank does not identify the client’s location or the state in which the fraud occurred, and says it believes the parent company of the customer has engaged a company restructuring agent.
Comments