Get the latest local business news delivered FREE to your inbox weekly.
Five Star Bank said it has been hit by fraudulent activity that could amount to exposure of up to $18.9 million.
Five Star Bank is investigating fraudulent activity that the bank says could amount to exposure of up to $18.9 million.
In a regulatory filing, the Warsaw-based bank said it “recently discovered fraudulent activity associated with deposit transactions conducted over the course of several business days ending in early March 2024 by an in-market business customer of the bank.”
Five Star said it continues to investigate the case. The bank says the exposure could amount to $14.1 million net of taxes.
“The ultimate financial impact could be lower and will depend, in part, on the bank’s success in recovering the funds,” Five Star said in its filing. “The bank plans to pursue all available sources of recovery to mitigate the potential loss. The bank will remain well-capitalized.”
The fraudulent activity was discovered during routine fraud monitoring by the bank, said Katherine Croft, a bank spokeswoman.
She declined to specify where the business is located. The bank has branches in upstate New York markets, including Buffalo and Rochester.
The stock of Five Star’s parent company, Financial Institutions, fell by more than 2% Monday afternoon. Financial Institutions disclosed the fraudulent activity in a filing with the Securities and Exchange Commission on Monday morning.
The size of the fraudulent activity is significant for a bank the size of Five Star. The estimated impact of the fraud is significantly more than the $9.8 million in profits that the bank reported during the fourth quarter of last year. And it exceeds the $13.7 million in credit losses from bad loans that it absorbed during all of last year.
Five Star said it is “working with appropriate law enforcement authorities in connection with this matter.”
“Based on the bank’s review of the circumstances of the fraudulent activity, the bank believes this incident is an isolated occurrence involving a single, deposit-only business relationship,” Five Star said.
Five Star’s parent company, Financial Institutions, reported $5.2 billion in deposits as of the end of 2023.
Matt Glynn
Get the latest local business news delivered FREE to your inbox weekly.
Reporter
{{description}}
Email notifications are only sent once a day, and only if there are new matching items.
Five Star Bank in a federal lawsuit accused Katherine Mott of being the driving force behind a “check-kiting” scheme that defrauded the bank o…
Five Star Bank wants a court-appointed receiver placed in charge of Katherine Mott’s Rochester-area businesses, as the bank accuses her of def…
Five Star Bank said it has been hit by fraudulent activity that could amount to exposure of up to $18.9 million.
Get up-to-the-minute news sent straight to your device.
