Late Return of Forged Item. Who Takes the Loss?

We have a bank that is requesting payment because they have a forgery. The forgery is of the drawer's signature. The bank did not send the check back within 24 hours and admits that it was a late return. They keep telling us that under UCC rules they have one year to recover the money from the Bank of First Deposit because the customer has one year to report a forgery. It is my understanding that they did not return the check in a timely manner and their bank is the one out the money. They could have checked their signature card for the proper signature and returned within the deadline. Their customer was out of town and they could not verify with their customer that the check was forged. Their response back to us is that we are the endorsing bank, therefore we are responsible to them for payment. Who will be the loser on the money?