FDIC takes aggressive action after Old Glory Bank’s capital falls to 2.69%

The Federal Deposit Insurance Corp. has issued a sweeping prompt corrective action directive against Old Glory Bank in Elmore City, Okla., citing a leverage ratio of just 2.69% on June 30 and classifying the institution as “significantly undercapitalized.”

The Aug. 28 directive required the bank to submit an updated capital restoration plan and imposed a broad range of restrictions on its operations, capital, deposits, management and potential strategic alternatives.

The action followed Old Glory Bank’s failure to respond to an earlier FDIC notice of intent to issue the directive.

The 2.69% leverage ratio is the central issue. Under the FDIC’s PCA framework, the designation triggers increasingly stringent requirements as a bank’s capital position deteriorates. For Old Glory, the resulting directive effectively puts it under intensive regulatory supervision while it works to restore its capital position.

The bank must submit an updated capital restoration plan. The directive bars capital distributions if making them would leave the bank undercapitalized. Management fees to anyone controlling the bank are similarly restricted when those payments would leave the institution undercapitalized.

The FDIC established potential liability for companies controlling Old Glory. Their aggregate liability is capped at the lesser of 5% of the bank’s total assets at the time it became undercapitalized or the amount necessary to bring the bank into compliance with applicable capital standards if the bank fails to comply with its updated capital restoration plan.

The directive places obligations not only on the bank but potentially on its controlling companies as well.

Old Glory also faces restrictions on growing its balance sheet. It cannot let its average total assets during a quarter exceed the average total assets of the prior quarter unless the FDIC has accepted its updated capital restoration plan, the growth is consistent with the plan and the bank’s tangible-equity-to-assets ratio is increasing at a pace sufficient to allow it to become adequately capitalized within a reasonable period.

The FDIC must approve certain expansion activities, including acquiring an interest in another company or insured depository institution, opening a new branch or entering a new business line.

The directive reaches Old Glory’s funding strategy as well. It is prohibited from accepting, renewing or rolling over brokered deposits. It cannot accept employee benefit deposits until it reaches “Adequately Capitalized” status.

The FDIC restricted the rates the bank can pay on deposits, requiring them to remain consistent with prevailing rates for comparable deposits in the region as determined by the FDIC.

The combination of restrictions limits some of the tools a bank can use to attract or retain deposits while it is attempting to rebuild capital.

Perhaps the most consequential provisions concern the bank’s future ownership and capital structure.

The FDIC directs that the bank sell enough shares or obligations to become adequately capitalized, with the securities sold required to be voting shares. The directive also says the bank must accept an offer to be acquired by a depository institution holding company, or combine with another insured depository institution, if grounds exist for appointing a conservator or receiver.

The FDIC also restricted transactions between affiliates and gives the regulator authority to require the bank or its subsidiaries to alter, reduce or terminate activities it determines pose excessive risk.

Old Glory’s management structure is also subject to regulatory restrictions. The bank must employ qualified senior executive officers approved by the FDIC. It cannot accept deposits from correspondent depository institutions, including renewals and rollovers of existing deposits.

The bank holding company is barred from making capital distributions without prior approval from the Federal Reserve.

Old Glory cannot pay bonuses to senior executive officers or provide compensation above their average pre-undercapitalization rate without prior FDIC approval.

The FDIC is requiring continuing visibility into the bank’s progress. Old Glory must provide regular written reports to the agency’s regional director detailing compliance with the directive and corrective actions being taken.

Old Glory had planned to merge with Digital Asset Acquisition Corp., a special purpose acquisition company, to form a crypto-focused financial institution, but that deal was terminated in August. The SPAC confirmed in an Aug. 13 regulatory filing that the companies mutually terminated their agreement after failing to gain approval from the Fed.

Old Glory had expected the deal to supply capital for its growth. The final prospectus disclosed that the bank holding company had a $14.8 million net loss in 2025 and a $4.5 million net loss in the first quarter of 2026.