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The FBI is investigating an employee of Malta's First Security Bank in connection with a long-term embezzlement scheme apparently involving nearly $3.7 million.

The name of the employee has not been disclosed.

First Security acknowledged the theft in a June 30 federal financial filing.

Montana banking commissioner Melanie Hall in Helena said this level of embezzlement is “incredibly rare” in the state.

“It’s a significant embezzlement from within the bank,” Hall said.

First Security depositors should not be affected, she said, because they are covered by the Federal Deposit Insurance Corp. up to $250,000 for most accounts. First Security is regulated by the Federal Reserve Board and the state of Montana.

The theft was discovered in early May by a third-party processing company that handles First Security’s in-house Visa and Mastercard accounts. The processor told First Security bank president Gary Howell about money missing at the bank, which has $39 million in assets.

“As the embezzlement took place, the money built up as though it was an asset of the bank. And when the money was stolen, we had to write off that money,” Howell said.

Writing off the money cut into the bank’s capital reserves, which are strictly regulated.

On May 2, Howell reported the theft to Phillips County Sheriff Scott Moran, who by protocol handed it over to the FBI.

On June 4, the Federal Reserve Board in Minneapolis ruled that the Malta bank was “critically undercapitalized” and gave Howell and the board of directors 30 days to strengthen the bank’s assets or sell out to another financial institution.

Since then, First Security has been trying to fix its balance sheet and prevent a forced sale.

“The shareholders have injected some more capital into the bank, and a claim is ongoing with the bonding insurance company,” Howell said.

The Federal Reserve order required First Security to get written approval from the Fed before accepting new deposit accounts. The regulator also restricted bonus or compensation payments to bank executives.

The U.S. Attorney’s Office in Billings declined to comment on the case.

Howell said this is the first serious problem at the bank since it opened in 1972.

“When something like this happens, all the regulatory agencies and law enforcement agencies come around,” he said. “We’re a small bank with 11 employees, so there aren’t a lot of hands to go around.”

Malta Mayor Shyla Jones said her town of 2,000 on the Hi-Line has three banks — First Security, The First State Bank of Malta and a branch of Independence Bank in Havre.

“If we were to lose any (of the banks), it would be detrimental to our agricultural and our business community,” the mayor said.

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