Diving overview:
The Office of the Comptroller of the Currency on Friday closed Lindsay, Oklahoma-based First National Bank of Lindsay and appointed the Federal Deposit Insurance Corporation as receiver. Then, on the same day, the FDIC announced that Duncan, Oklahoma-based First Bank & Trust Co. had agreed to acquire the failed bank’s insured deposits. The OCC intervened after it “identified false and deceptive bank records and other information suggesting fraud that revealed the depletion of bank capital,” the agency said, adding that Lindsay Bank was “unable to conduct transactions.” It added that it was determined to be in a “dangerous or unsound condition.”
Dive Insight:
First National Bank of Lindsay reported total assets of $107.8 million and total deposits of $97.5 million. But roughly $7.1 million of the bank’s deposits exceeded FDIC insurance limits, the agency said, adding that the amount could change as the FDIC collects more customer information.
The FDIC announced Monday that it would make 50% of uninsured funds available to depositors, adding that the amount could increase as the FDIC sells assets of failed banks.
First Bank & Trust agreed to accept insured deposits at a 6.67% premium and also buy about $20 million in the failed lender’s assets, according to the FDIC. Federal regulators said they would retain “remaining assets for later disposition.”
First National Bank’s only office in Lindsay was scheduled to reopen Monday as a First Bank & Trust Co. branch. Depositors of the failed bank will automatically become depositors of the acquired bank, and insured deposits underwritten by First Bank & Trust will continue. FDIC insured.
According to the OCC, all First National Bank of Lindsay customers will have access to insured deposits, checks drawn on the bank will continue to be processed, and customers with loan payments must continue to be processed. That’s what it means.
The FDIC estimates that the failure will likely result in a loss of about $43 million to the Deposit Insurance Fund, although that number could change due to asset sales. The agency added that “alleged fraud” could be the cause of the failure, which could be a blow to the DIF.
The OCC has also referred the matter to the Department of Justice, the Justice Department said. “The Department of Justice has a wide range of tools to hold individuals accountable for their criminal acts and remains victim-focused in all matters,” the agency said.
First Bank of Lindsay’s problems date back to 2006 and 2007, when the OCC issued three orders, including one barring the bank’s former president, E. Ray Murray, from the industry. was submitted to the same bank.
While there may not be any significant loss on the client’s side, “(b) the biggest hit is reputational,” Karl Goss, a partner at law firm Hunton Andrews Kurth, told Banking Dive in an email. He said the value of equity would be wiped out, adding that employees were likely to continue working for the bank but could be laid off once the transition was complete.
“The management team will almost certainly lose their jobs and, depending on what happened, could be held criminally or civilly liable for the failure,” Goss said.
Goss said the public will have a better understanding once the FDIC’s Office of Inspector General investigates the failure and releases its findings — a process that will take about six months. .
The FDIC announced last week that DIF reserve requirements are expected to reach the legal minimum in 2026, ahead of the 2028 deadline.
Lindsay First National Bank is the second bank to fail in the United States this year. Philadelphia-based Republic First Bank collapsed in April, ending more than two years of infighting that had divided the financial institution’s board amid a bitter power struggle.
In 2023, a total of five banks failed, including Silicon Valley Bank, Signature Bank, and First Republic.
