FDIC eases restrictions on Oklahoma bank after capital improvements

The Federal Deposit Insurance Corp. has relaxed oversight measures for Old Glory Bank, an Elmore City, Oklahoma-based institution, after confirming the lender now meets capital adequacy standards. The revised order, released last Tuesday and published Friday, removes some previous limits while keeping close monitoring to preserve financial stability.

Old Glory had been labeled significantly undercapitalized by the FDIC in August, prompting the requirement to file an updated plan for restoring its capital position. The bank’s financial challenges stemmed from the collapse of a merger deal between its holding company and Digital Asset Acquisition Corp., announced in January but abandoned less than two weeks later. This failure left Old Glory without a viable solution to address its capital deficit.

Since May 2024, the bank had operated under an FDIC consent order due to insufficient capital reserves. A filing by Digital Asset Acquisition Corp. in July cautioned that Old Glory might need to explore a sale or liquidation if the merger did not proceed. The bank had consistently failed to reach the 14% Tier 1 leverage ratio mandated by the 2024 order.

The FDIC’s updated terms permit Old Glory to raise capital through common stock sales, noncumulative perpetual preferred stock, or direct infusions from its board or shareholders. However, any securities offering must receive prior FDIC approval. The bank remains vulnerable to forced acquisition if it cannot sustain its capital levels. Additionally, the FDIC will review major transactions, including investments, expansions, or highly leveraged credit extensions.

Old Glory is prohibited from making capital distributions that would leave it undercapitalized, nor can it accept brokered deposits or employee benefit deposits if they pose a financial risk. The bank must also adjust deposit interest rates to match regional benchmarks and discontinue activities the FDIC deems excessive risks.

The holding company’s ability to distribute capital is restricted without Federal Reserve approval. Furthermore, Old Glory cannot issue excessive bonuses or compensation to senior executives for the 12 months before it was classified as undercapitalized. Compliance will be tracked through monthly reports submitted to the FDIC’s Dallas regional office.

The restrictions will remain in place until Old Glory maintains adequate capitalization for four consecutive quarters beginning after September 30. While the FDIC acknowledges progress, the safeguards ensure long-term stability.