FDIC clamps down on ‘significantly undercapitalized’ Old Glory Bank

Dive Brief:

The Federal Deposit Insurance Corp. has issued a prompt corrective action directive to Elmore City, Oklahoma-based Old Glory Bank for being “significantly undercapitalized.”
Old Glory’s latest call report showed the bank’s leverage ratio was 2.69%, as of June 30, the FDIC said in an order issued Aug. 28 and made public Friday. The bank failed to respond to regulators’ notice of intent to issue the directive.
The FDIC ordered the bank to submit an updated capital restoration plan within two weeks, and directed the bank not to engage in any capital distribution or pay any management fees to those in control of the bank if doing so would further harm its capital situation.

Dive Insight:

A spokesperson for Old Glory said Monday the bank is “doing again what we always do, which is raising capital from our great ownership group.”

In August, Old Glory Holding Company and special-purpose acquisition company Digital Asset Acquisition Corp. scrapped their plans to merge. The merger agreement, struck in January, would have created cryptocurrency-focused OGB Financial Company, a Texas corporation listed on the Nasdaq exchange.

An Old Glory spokesperson said the Federal Reserve did not approve the transaction. The Fed, at the time, declined to comment.

“The Fed knocked us down by not approving our deSPAC, but we are getting back up, and we will continue on our mission of providing all of America the freedom in banking they deserve,” the Old Glory spokesperson said in an email Monday.

According to a prospectus filed by Digital Asset Acquisition Corp. in July, Old Glory has operated under a FDIC consent order since May 2024 due to insufficient capital. The bank said then it may have to pursue “a sale or organized wind-down” if the deal wasn’t consummated, because it lacked sufficient capital to satisfy regulators.

Old Glory Bank is a $279.4 million-asset lender focused on “serving the Freedom Economy” with its “pro-America online banking platform.” Co-founders include former Housing and Urban Development Secretary Dr. Ben Carson and former Trump administration press secretary Sean Spicer.

Old Glory has failed to maintain a tier 1 leverage ratio of at least 14% as required by the consent order, but the merger was set to solve those requirements, according to the prospectus. Bank executives said they believed they would be able to negotiate with regulators to have a “more reasonable” ratio “such as 7 [percent to] 9%.”

“If we take neither of these alternative actions, we would expect other regulatory actions to be taken, including actions to enjoin ‘unsafe or unsound’ practices,” the bank said in the July prospectus.

In August, prior to the prompt corrective action’s issuance, an Old Glory spokesperson told Banking Dive the lender needed to raise “a little capital” to boost its tier 1 leverage ratio above 4% and replace the amount the SPAC deal would have brought in, and said it was “currently engaged in those discussions.”

“Significantly undercapitalized” is the fourth of five capital categories, with “critically undercapitalized” being the lowest level, according to the FDIC. “An insured depository institution is ‘significantly undercapitalized’ if it is significantly below the required minimum level for any relevant capital measure.”

The prompt corrective action directive, which differs from a consent order in that it doesn’t feature a signature from a bank representative, listed a number of provisions that come with the “significantly undercapitalized” status.

Those include the inability to accept any brokered deposits, or accept employee benefit deposits until Old Glory is at least adequately capitalized. The bank also needs to restrict the interest rate it pays on deposits, reduce or terminate activities the FDIC decides poses excessive risk, and not pay a bonus or additional compensation to any senior executive without regulators’ approval.

Regulators also said the bank needs to employ qualified senior executive officers.

Old Glory must provide written reports to the FDIC each month detailing its compliance with the directive and corrective actions being taken. Provisions remain in effect until the lender has been adequately capitalized on average for four consecutive quarters, the FDIC said.

Old Glory lost roughly $8 million over the first half of the year, according to the June call report from the Federal Financial Institutions Examination Council.