Carrollton Bancorp reported yesterday that its second-quarter earnings were practically wiped out by a $1.2 million after-tax loss from an alleged check-kiting scheme by one of its commercial customers.
The community bank said its profit for the three months that ended June 30 decreased 91 percent to $58,000, or 2 cents per diluted share, from $634,000, or 22 cents per diluted share, for the second quarter last year.
Still, the bank's second-quarter net income was higher than the company's initial estimate of $18,000 when it first alleged the check-kiting operation last month. Excluding the charge, the company said second-quarter profit would have been $1.2 million, or 43 cents per diluted share.
Carrollton also said its six-month profit was $926,000, or 32 cents per diluted share, compared with $1 million, or 37 cents per diluted share, last year.
Besides the check-kiting loss, earnings for the six months include a charge of about $2.3 million for a prepayment penalty for restructuring a $35 million Federal Home Loan Bank advance. The charge, however, was offset by a $2.2 million gain from the sale of equity securities, the bank said.
Shares of the thinly traded Baltimore company were unchanged at $17.48 yesterday.
Check-kiting allegations surfaced in June against A&B Check Cashing, which had a string of stores in Baltimore. In court papers and through public statements, the scheme affected Carrollton, Baltimore County Savings Bank and Global Express Money Orders Inc.
A&B's parent company, Colleen Inc., has filed for bankruptcy protection. Brian Satisky, who along with his brother Alec Satisky owned Colleen Inc., testified at a bankruptcy hearing last month but offered few details about the company's finances. Alec Satisky committed suicide at the company's headquarters in June, according to Baltimore police and the state's medical examiner.
The FBI has opened an investigation into the check-kiting allegations.