First Southern Bancshares of Alabama in Florence said has taken a second-quarter charge of almost $1 million dollars because of what may be fraudulent loans.

The $180 million-asset parent of First Southern Bank is pursuing an internal investigation of bad loans to a commercial customer and "several persons affiliated with the customer," it said in a news release last week.

"We must accept that we may have been victimized by a fraudulent scheme and learn from the unfortunate experience," Charles L. Frederick 2d, the holding company's president, said in the release.

Mr. Frederick refused to answer discuss the investigation, which he said began a "couple of weeks ago."

First Southern charged off $925,000 against its $1.5 million reserve because of the loans, according to the statement. The loss is projected to cut the quarter's earnings by approximately 44 cents a share. Diluted earnings per share for the first quarter were 21 cents, up from 19 cents in the same period last year.

In addition to the internal review, the Alabama Department of Banking and the Federal Deposit Insurance Corp. are also conducting investigations, Mr. Frederick said.

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